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Opportunity Zones Working Group Prepares for a Busy 2023

Published by Jason Watkins on Monday, December 5, 2022

Journal Cover December 2022   Download PDF

The Novogradac Opportunity Zones (OZ) Working Group was founded to identify and address technical and administrative issues that arise under the federal OZ incentive.

The group provides a platform for OZ stakeholders to work together to create consensus solutions to technical OZ incentive issues and to provide recommendations to the government to make the OZ incentive more efficient in delivering benefits to low-income communities.

During 2022, the OZ Working Group worked on numerous projects and technical research initiatives including:

  • regulatory recommendations to Lily Batchelder, the current Assistant Secretary of the Treasury for tax policy;
  • response to Treasury request to provide qualified opportunity fund (QOF) decertification regulatory language;
  • analysis of the Opportunity Zones Transparency, Extension and Improvement Act, including a comment letter to the co-sponsors with suggested modifications and corrections;
  • recommendations for Treasury’s 2022-2023 Priority Guidance Plan;
  • submission of Community Reinvestment Act Modernization comment letter;
  • review and discussion of the Senate Finance Committee letters to Qualified Opportunity Funds;
  • monitoring of proposed state decoupling initiatives;
  • continued monitoring and analysis of state- and local-level OZ incentives;
  • review and analysis of the Treasury
  • Inspector General for Tax Administration report on OZs;
  • review and analysis of House Ways and Means Committee letter to Treasury on OZ recommendations; and
  • numerous OZ technical research projects to develop industry recommended practices.

It is expected that 2023 will be another busy year as the OZ Working Group actively works on several projects and will continue to analyze and provide recommendations on new legislation, proposed regulations and other OZ-related issues as they arise. Following are some of the key issues that the OZ Working Group addressed in 2022 and will examine in 2023:

Opportunity Zones Transparency, Extension and Improvement Act

On April 7, 2022, the Opportunity Zones Transparency, Extension and Improvement Act was introduced in both the Senate and the House of Representatives. This legislation would restore the reporting requirements from the original Investing in Opportunity Act. Recall that the OZ incentive was enacted in 2017 as part of the Tax Cuts and Jobs Act under the budget reconciliation process. Senate parliamentary rules required that nonbudgetary items, such as the OZ reporting requirements, be dropped from the final legislation because it was passed using budget reconciliation.

Additionally, the proposed legislation would:

  • extend the incentive from Dec. 31, 2026, to Dec. 31, 2028,
  • remove the OZ designation from certain higher-income census tracts,
  • modify the definition of QOF to allow for feeder funds, and
  • establish a State and Community Dynamism Fund.

During 2022, the OZ Working Group conducted a detailed review of this legislation and worked with the Economic Innovation Group to submit a joint response to the co-sponsors of the legislation that contained numerous recommendations and corrections designed to improve the proposed legislation.

As of the writing of this article, it remains to be seen whether this legislation will move forward during the lame-duck 117th Congress or whether the legislation will need to be reintroduced during the 118th Congress. The OZ Working Group stands ready to review this legislation again as it advances through the legislative process and submit additional recommendations to the co-sponsors as necessary.

The introduced legislation also contains several areas where Treasury would be granted authority to prescribe regulations, including rules for replacement tracts, preexisting investments and information reporting. If the legislation is enacted, the OZ Working Group will once again take a leadership role with reviewing the proposed regulations as they are made available and providing detailed commentary and recommendations to Treasury.

Request for Working Capital Safe Harbor Guidance

The OZ Working Group’s members received innumerable questions from stakeholders concerning the complex rules and general operation of the working capital safe harbor written plans and schedules (WCSH Plans) and it has become increasing clear that additional guidance from Treasury is urgently needed. The OZ Working Group is reaching out to Treasury with specific recommendations for additional guidance for the following areas:

  • substantially consistent use rules for modified WCSH Plans,
  • available relief for continuing federally declared disasters,
  • whether working capital assets can be partially spent on non-OZ property,
  • clarification of what being in a working capital safe harbor period means, and
  • establishment of a new reasonable expectations safe harbor for qualified opportunity funds.

During 2023, the OZ Working Group will continue the WCSH guidance initiative and will continue to identify opportunities to improve the efficiency of the OZ incentive and provide recommendations to Treasury for regulatory and subregulatory guidance.

Opportunity Zones 2.0

The OZ Working Group expects before long that there will be an opportunity for members of Congress to introduce additional new legislation to further improve the OZ incentive.

In anticipation of this potential future legislation, OZ Working Group members have been engaged in the development of consensus recommendations intended to increase the impact of the incentive. Some of these suggestions include:

  • additional incentives for impact investments or investments into underserved OZs,
  • modifications to promote investment into operating businesses, and
  • rolling seven-year deferral periods.

The OZ Working Group intends to provide a complete list of its recommendations to members of Congress during 2023.


The leadership of the OZ Working Group has contributed greatly to the success of the OZ incentive during the first five years of implementation and there is still more work to do to modify and improve the incentive to maximize its potential to transform distressed communities. The OZ Working Group is excited to flip the calendar to 2023 where it will continue the work of helping to shape the OZ incentive to maximize its efficiency and effectiveness in transforming communities.

Joining the OZ Working Group

Parties interested in joining the OZ Working Group can contact John Sciarretti at [email protected] or Jason Watkins at [email protected].

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