ABA targets operational issues within Opportunity Zones

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The American Bankers Association (ABA) recently provided the Internal Revenue Service (IRS) with feedback regarding the Opportunity Zones tax incentive, noting there are several operational issues to be addressed.

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The program enables taxpayers with qualified gains to invest them into identified Opportunity Zones. When requirements are met, the recognition of the eligible gains is deferred until 2026, and a portion of the gains may permanently avoid taxation.

The IRS said the proposed regulations guide gains that may be deferred, as well as special rules for an investment in a Qualified Opportunity Fund held by a taxpayer for at least 10 years.

ABA officials said they are seeking IRS clarifIcation regarding an eligible taxpayer including all members of a consolidated group; include C corporation opportunity zone funds in the results of a consolidated group; provide flexibility concerning the timing of qualified Opportunity Fund investments; and modify the identification period for capital gains allocated from pass-through entities.

The IRS is also being encouraged by the ABA to provide grandfathering and transition rules for taxpayers who have made good faith investments relying on the original statute and previously issued proposed guidance.

The Opportunity Zone was created as part of the 2017 tax reform law and seeks to drive long-term equity capital to distressed communities.

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