Qualified opportunity funds (QOFs) tracked by Novogradac report a cumulative $28.37 billion in equity raised as of March 31, a $3.97 billion increase over the similar number reported Dec. 31. Michael Novogradac reported the figures at the 2022 Novogradac Spring Opportunity Zones Conference today in Long Beach, California, and wrote a blog post with more information. The increase in equity reported in the first quarter of 2022 is more than three times the increase in the same quarter of 2021 and is nearly equal to the equity increase in the final quarter of 2021. Novogradac reports QOF equity raises based on a collection of information from QOFs that voluntarily provide information or from other public sources. The Novogradac data does not include proprietary or private QOFs owned or managed by their principal investors.
The Internal Revenue Service (IRS) announced Tuesday in a news release that some qualified opportunity funds (QOFs) that filed Form 8996 may receive one of three letters seeking additional information about opportunity zones (OZ) investing. Some QOFs that attached Form 8996 to their returns may receive Letter 6501, which seeks additional information to support the annual certification of investment standard requirement. Filers of Form 8997 may receive either Letter 6502, Reporting Qualified Opportunity Fund Investments, or Letter 6503, Annual Reporting of Qualified Opportunity Fund Investments. For recipients of any of the three letters, additional details are required.
Bipartisan legislation was introduced today in the Senate and House of Representatives that would extend the federal opportunity zones (OZ) incentive, add reporting requirements, provide an early sunset for nonimpoverished OZs and more. The Opportunity Zones Transparency, Extension and Improvement Act would extend the OZ incentive through the end of 2028 to facilitate continued investment, implement the reporting requirements that were included in 2017 in the Investing in Opportunities Act and sunset the OZ designation for census tracts with a median family income at or above 130% of the national median family income. The legislation would also allow qualified opportunity funds (QOFs) to be organized as “funds of funds” to invest in other QOFs which would allow smaller projects to receive funding.
Legislation introduced in the Rhode Island House of Representatives would require all entities that receive the Rebuild Rhode Island Tax Credit–which includes the state historic tax credit (HTC) and a credit for mixed-use developments in opportunity zones (OZs) that support new affordable or workforce housing–to pay prevailing wages to construction workers. H.B. 7985 applies to all applications of the Rebuild Rhode Island Tax Credit and provides for the revocation of such credits for failure to meet the requirements.
Qualified opportunity funds (QOFs) tracked by Novogradac reported equity investment of $6.88 billion over the final six months of 2021, according to the Novogradac Opportunity Zones Investment Report: Data Through Dec. 31, 2021, which was released today. As of the end of 2021, the 1,342 QOFs tracked by Novogradac (978 of which report a specific amount of equity raised) had raised $24.40 billion in equity. The jump of nearly $7 billion in reported equity since June 30, 2021, is the largest increase in any reporting period since Novogradac began tracking QOF investment in May 2019. The semiannual report also includes data on the types of reported investment, the planned geographic focus of investment and the top 20 states and top 40 cities for targeted QOF investment.
The Internal Revenue Service (IRS) published two private letter rulings (PLRs) granting relief to a taxpayer who was late to file a Form 8996 to self-certify as a qualified opportunity fund (QOF). PLR 202205020 concerns a taxpayer that didn’t file a Form 8996 in a timely manner because the taxpayer and its accountant were unaware of the requirement to do so and PLR 202205021 addresses a similar situation in which the accountant filed a return and then an amended return without including a Form 8996. The IRS granted relief to file Form 8996 within 60 days of the ruling. PLRs are only directed to the taxpayer and may not be used or cited as precedent.
Legislation passed in Washington, D.C., and awaiting congressional approval would clarify that capital gains deductions related to the opportunity zones (OZ) incentive are available to individuals, estates and trusts in the same manner as to corporations. D.C. Council Bill 240513 would take effect following its 30-day period of congressional review.
The Internal Revenue Service (IRS) last week released a private letter ruling granting an extension to a limited liability company to make a timely election to be certified as a qualified opportunity fund (QOF). PLR 202202009 determined that the failure of the LLC’s accounting firm to file IRS Form 8996–which allows the self-certification as a QOF for the opportunity zones (OZ) incentive–was unintentional and the LLC acted reasonably and in good faith. The IRS also ruled that the government’s interests are not prejudiced by providing an additional 45 days to file a Form 8996 to self-certify as an QOF. PLRs are directed only to the taxpayer requesting them and may not be used or cited as precedents.
Sen. Ron Wyden, D-Oregon, chair of the Senate Finance Committee, today sent letters to several qualified opportunity funds (QOFs) seeking detailed information about the opportunity zones (OZ) incentive projects into which they have invested. Wyden requested responses as soon as possible, but no later than Feb. 3. Wyden requested details including the list of all OZ projects, job creation data, details of OZ-related tax benefits, timelines and more.
Legislation in the Mississippi House of Representatives would conform the state tax code to the Internal Revenue Code (IRC) concerning opportunity zones (OZ) investment in 19 of the state’s 82 counties. H.B. 133 would apply to the deferral or nonrecognition of gain by investment in a qualified opportunity fund (QOF) in those 19 counties through Dec. 31, 2024. Beginning Jan. 1, 2025, the conformity would expand to any investment in the state. Mississippi’s four bordering states all have either limited or full conformity to the IRC.
Nine Democrats on the U.S. House of Representatives’ Ways and Means Subcommittee on Oversight sent a letter Tuesday asking the U.S. Department of the Treasury to consider three ways to boost the benefits of the opportunity zones (OZ) incentive in helping communities in need: implementing a rigorous certification process for OZ funds, allocating a dedicated agency staff to oversee OZs and requiring transaction reporting separate from tax forms. The letter is the product of a Nov. 16 committee hearing on OZs. Rep. Bill Pascrell of New Jersey, the subcommittee chairman, was among the nine signatories.
The U.S. Government Accountability Office (GAO) today released a report on the opportunity zone (OZs) incentive with two major recommendations: that the Internal Revenue Service (IRS) address risks caused by limited data availability and take steps to mitigate those risks, and that the IRS research compliance risks of high-wealth investors and large partnership qualified opportunity funds (QOFs). GAO found that on average, the census tracts selected and designated as OZs had higher poverty and a greater share of non-White populations than eligible, but not selected, tracts, and that these differences were statistically significant.
Novogradac partner John Sciarretti announced at the Novogradac 2021 Fall Opportunity Zones Conference in Cleveland this week that qualified opportunity funds (QOFs) tracked by Novogradac raised $20.28 billion by the end of September, a jump of nearly 16% over three months. Novogradac is tracking 1,243 QOFs, of which 909 report a specific equity amount–an amount that is $2.76 billion more than the total at the end of June. While the equity amount increased by 15.8% over that period, the number of QOFs reporting an equity raise increased by 6.6%.
Legislation introduced in the Ohio state Senate would temporarily increase the statewide cap for the state historic tax credit (HTC) and the state opportunity zone (OZ) investment tax credit and make other modifications. S.B. 225 would increase the annual state HTC cap to $120 million for fiscal years 2022 and 2023 from the current $60 million cap and increase the transaction cap to $10 million from the current $5 million for fiscal years 2021, 2022 and 2023. The legislation would also increase the state HTC from 25% to 35% for HTC properties in communities with populations less than 71,000 according to the 2020 census. S.B. 225 would also increase the statewide OZ investment credit cap from $50 million to $100 million for the period of July 1, 2021, to June 30, 2023, reverting to $50 million per biennium after that.
Rep. Michelle Steele, R-California, introduced legislation to extend the opportunity zones (OZ) incentive by creating subsequent rounds of OZ designation, starting Jan. 1, 2027, with further designations every 10 years. The Growth and Opportunity Act (H.R. 4608) would therefore extend the date by which investors in qualified opportunity funds (QOFs) can exclude 10% of gains after holding the investment for five years from Dec. 31, 2026. Another bill introduced in the House would extend the tax deferral date by until Dec. 31, 2029.
Qualified opportunity funds (QOFs) tracked by Novogradac raised $17.52 billion in equity as of midyear, according to the Novogradac Opportunity Zones Investment Report: Data Through June 30, 2021, which was released today. The semiannual report includes information on the geographic and investment-type focus of more than 1,000 QOFs and includes the top 20 states and top 40 cities for planned investment, as well as the number of QOFs in each of several ranges of equity raised.
The Internal Revenue Service will publish in Thursday’s Federal Register corrections and correcting amendments to the final regulation for the opportunity zones (OZ) incentive released in December 2019 and published in the Federal Register in January 2020. The corrections include a clarification that startup businesses using the working capital safe harbor for property that would be nonqualified financial property except for the working capital safe harbor, are deemed to meet the 70% tangible property test during the working capital safe harbor period, while retaining the rule that the property is not treated as qualified OZ business property for any purpose. The correcting amendments change the language of both the preamble to the final regulations and the final regulations. The amendments are effective Thursday and are applicable on or after Jan. 13, 2020. The Opportunity Zones Working Group had requested the IRS address the issues included in the corrections.
Budget legislation signed by Ohio Gov. Mike DeWine includes a provision increasing the state opportunity zones (OZ) tax credit taxpayer cap per fiscal biennium to $2 million. The budget legislation retained the statewide cap of $50 million per fiscal biennium, but doubled the amount a single taxpayer can claim. The 10% credit is for investments in qualified opportunity funds that hold 100% of their invested assets in Ohio.
Rep. Jim Hagedorn, R-Minnesota, introduced legislation to increase the number of opportunity zones (OZs) and extend the OZ tax deferral date by three years. The Expanding Opportunity Zones Act of 2021 (H.R. 4177) would boost the percentage of low-income communities that each state that can designate as OZs from 25% to 30%, which would create an estimated 950 additional OZs across the nation.
The board of governors of the Federal Reserve System (Fed) and Federal Deposit Insurance Corporation (FDIC) released the list of distressed or underserved nonmetropolitan middle-income geographies for 2021, which makes revitalization or stabilization activities in those areas eligible for Community Reinvestment Act (CRA) consideration. The designations reflect local economic conditions, including unemployment, poverty and population changes. The Fed and FDIC continue to apply a one-year lag period for areas listed in 2020 that are no longer designated as distressed or underserved, making revitalization or stabilization activities in those geographies eligible for CRA condensation for 12 months after the publication of the current list.
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