Recent Proposed Treasury Regulations governing the new "Opportunity Zone" investment program – and its potential to spur productive real estate investment in struggling, low-income communities – is the focus of an Oct. 26 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick. 

• In the interview, DeBoer and McCormick provide answers to critical questions regarding the highly anticipated regulatory guidance and its implications for the real estate industry.
• DeBoer notes, "For real estate, the proposed regulations are unquestionably positive. They clarify key technical questions and open issues, and they should allow investments in funds and in underlying projects to go forward. While some important questions remain, we continue to believe that the Opportunity Zone program will be a powerful catalyst for transformational real estate investment in these designated low-income areas."
• The Treasury in June designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48 and Roundtable Weekly, June 22 and Interactive Map, Economic Innovation Group)
• The Wall Street Journal reported this week that the highly-anticipated guidelines have offered investors greater certainty to begin the process of raising and investing billions of dollars into new real-estate funds targeting opportunity zones.  (WSJ , Oct 23)
• The GlobeSt Q&A also clarifies who can defer gain by investing in an Opportunity Fund; the 180-day time period when investors are required to roll capital gain into a Fund; and how the proposed rules allow a Fund to mobilize capital over a period of nearly three years. 
• McCormick explains in the article : "The proposed rule creates a 'working capital safe harbor.' Opportunity Funds have a minimum of 31 months to invest their working capital in qualified opportunity zone property. The longer runway aligns better with the practical realities of real estate investment."  
• DeBoer also offers clarifications about the "original use" and "substantial improvement" tests of an Opportunity Zone property, noting that they "… are critical elements of the Opportunity Zone program, and they are clarified in important ways in the proposed rules. Keep in mind, Congress wanted to stimulate new capital investment, not simply the transfer of income-producing assets from one owner to another. Therefore, property must either be put to its original use by the fund, or the fund must substantially improve the property. The Opportunity Zone law defines substantial improvement as the doubling of the adjusted tax basis of the property. The regulations provide that the original use and substantial improvement requirements only relate to the structure and not the underlying land."
• Further clarification about the program is expected.  According to DeBoer, "Some of the most important questions relate to Opportunity Fund transactions and the tax consequences when a fund buys, sells, and/or reinvests in Opportunity Zone property … Treasury and the White House have indicated that additional guidance is forthcoming before the end of the year. The Roundtable will be working with policymakers to ensure the next tranche of guidance and the final rules maximize productive, job-creating investment in Opportunity Zones."

The Roundtable's Tax Policy Advisory Committee (TPAC) recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation.  TPAC's Opportunity Zone Working Group will continue to provide insight into how the industry can help the program fulfill its ambitious objective of stimulating economic development and job creation in low-income communities. (Roundtable Comment Letter, June 28 and Roundtable Weekly, July 20)