AICPA Comments on Proposed Tax Regulations for Investing in Qualified Opportunity Zones

January 25, 2019

  • Recommendations cover several areas of the proposed regulations that provide guidance on the deferral of gains resulting from investment in a qualified opportunity fund

Washington, D.C. (January 25, 2019) – The American Institute of CPAs (AICPA) has submitted comments and recommendations to the Internal Revenue Service (IRS) related to the proposed regulations to implement Investing in Qualified Opportunity Zones (REG-115420-18).  The proposed rules provide guidance on the deferral of gains resulting from a taxpayer’s investment in a qualified opportunity fund (QOF).

The deferral is allowed under Internal Revenue Code sections 1400Z-1 and 1400Z-2 in order to encourage investment that will result in economic growth in designated low-income communities. 

The AICPA recommended that the U.S. Department of the Treasury and the IRS provide guidance on the following seven issues:

  • Disposition of an interest in a pass-through entity that elected to defer gain;
  • 180-day period for a partner electing deferral;
  • Deferral election on an amended tax return;
  • Extension of 10-year basis step-up election until December 31, 2047;
  • Effect of Internal Revenue Code section 179 and bonus depreciation under section 168 on “substantial improvement” of the tangible property requirement;
  • Guidance stating that rental real estate is a trade or business for purposes of section 1400Z-2;
  • Guidance stating that the definition of “corporation” for all purposes of section 1400Z-2 includes subchapter S corporations;

The AICPA also requested guidance or clarification of a variety of other issues related to section 1400Z-2.