Dear Mr. Kautter:
We write regarding the implementation of the Opportunity Zones Program, created by the Tax Cuts and Jobs Act of 2017. The program has the potential to incentivize the investment of billions of dollars in underserved communities in the United States. To do this, the act authorized the creation of Qualified Opportunity Funds (QOF). If investors rollover realized capital gains into such funds, the act provides for the deferral and reduction of capital gains taxes owed. By statute, a fund must invest 90 percent of its assets in qualified property and businesses in Opportunity Zones.
Investors and potential fund managers are eager to begin making investments that could bring economic growth to these areas. However, many are hesitant to move forward without clear guidance on a variety of matters regarding the tax treatment of their investments and the implementation of QOFs. We understand that, in the coming weeks, IRS plans to issue guidance to that end. For the program to be a success, this guidance must be specific enough that investors can feel confident that they fully understand the opportunities and risks associated with their investments in a QOF.