Opportunity Zone Update – OMB Guidance Expected and Some State Follow On – Brad A. Molotsky, Esq.

Continued high interest and activity on the Opportunity Zone fronts on many levels this past week. Conversations, closings and connections continue at a torrid pace – including a packed IMN conference in NYC this past week with many of the national and regional luminaries in attendance. By way of a quick update on a few fronts, courtesy of our friends at Novogradac for their recon:

Federal – On March 12th, the Office of Information and Regulatory Affairs (OIRA) received the 2nd tranche of regulatory guidance for review from the Internal Revenue Service (IRS) concerning the opportunity zones (OZ) incentive. OIRA is a division of the White House Office Management of the Budget. The proposed IRS rule is expected to address what types of property qualify as qualified OZ business property, steps an OZ business must take to be qualified, the penalty for a qualified opportunity fund’s failure to meet the 90% investment standard and more. After a mandated review of at least 10 days, the OMB is expected to release the guidance to be published in the Federal Register. The first tranche of guidance was reviewed for 36 days before it was published.

Vermont – H 442 introduced in the Vermont Legislature would make investments made in Opportunity Zones eligible to apply annually for the state Downtown and Village Center Tax Credit, which is twice as often as other projects are allowed to apply and would expand eligibility under the program only for OZ investments. The Downtown and Village Center Tax Credit covers between 10 percent and 50 percent of eligible rehabilitation expenses and has a $2.4 million statewide annual cap. If enacted, the bill would go into effect July 1.

Ohio – Gov. Mike DeWine said that his proposed 2020-2021 budget will call for a 10% state income tax credit to attract investment to opportunity zones. DeWine will propose a nonrefundable credit using existing tax credit availability to create the new credit.

At this point 31 states have “followed form” and are offering some level of state capital gains relief to those who follow the federal opportunity zone rules and invest in businesses or real estate pursuant to the federal OZ rules and regulations. New Jersey is moving ahead with a bill to become the 32nd state.

I look forward to seeing some of you on the 25th at our discussion in Baltimore on OZs. If of interest, drop me an email as space is limited. Best regards.
– Brad A. Molotsky, Esq.