New Life for Opportunity Zone Legislation?

On September 27, Reps. Mike Kelly (R-PA), Dan Kildee (D-MI), Carol Miller (R-WV), and Terri Sewell (D-AL) reintroduced the Opportunity Zones Transparency, Extension, and Improvement Act in the House of Representatives. This bill was first introduced in April 2022, and this current version makes some modifications while retaining the original bill’s key provisions.

Notably, the bill would extend both the investment and deferral periods for qualifying investments until December 31, 2028, which provides two additional years beyond the current expiration on December 31, 2026. This would allow more recently made investments in qualified opportunity funds to become eligible for up to 15% permanent gain reduction if certain holding periods are met. The bill would also allow fund-of-fund investments, which is not permitted under current opportunity zone rules and may provide for easier access to capital sources.

Another major provision of the original bill, which is retained in this newly introduced version, is the creation of a more detailed reporting mechanism for qualified opportunity funds, qualified opportunity zone businesses, and their investors. This new requirement would create additional information reporting, such as non-financial data relating to job creation and housing units, as well as carry high penalties for noncompliance.

Other provisions in this bill include the early sunset of certain opportunity zone census tracts with high median family income, to be replaced with other census tracts to be designated by state governors, and also the new designation of formerly industrial brownfield tracts as qualified opportunity zones. Lastly, the bill would create federally funded state and community programs to support, assist, and incentivize building and predevelopment activities in opportunity zones.

Our OZ working group will be watching this bill closely as Congress takes up several action items during the remainder of the year.