On April 24th, the IRS made several updates to its OZone FAQs. The two most significant updates are guidance as to how each OZone Fund can be formed and a timeline for further guidance on O-Zone implementation.
Many stakeholders have speculated as to what the process will be for qualification for O-Zone funds, with many advocating for certain requirements. In the end, the IRS has given a strong indication that limited standards will apply in order to facilitate investment and quick implementation:
“Q. How does a taxpayer become certified as a Qualified Opportunity Fund?
“A. To become a Qualified Opportunity Fund, an eligible taxpayer self certifies. (Thus, no approval or action by the IRS is required.) To self-certify, a taxpayer merely completes a form (which will be released in the summer of 2018) and attaches that form to the taxpayer’s federal income tax return for the taxable year. (The return must be filed timely, taking extensions into account.)”
Of course, there will be more steps to implementation and the Service reported:
“Over the next few months, the Treasury Department and the Internal Revenue Service will be providing further details, including additional legal guidance, on this new incentive. More information will be available at Treasury.gov
We await further guidance from the IRS on many questions - how O-Zone Funds are structured, what types of investments and businesses will qualify as O-Zone investments, transition rules, and the combination of O-Zone funds with other federal tax incentives such as New Markets and Low Income Housing Tax Credits.
In the meantime, each State and U.S. territory has submitted zones to the Treasury Department for certification. 18 have been certified to date and the balance must be certified under the Tax Act by May 20th if not before. We have discussed the designations in Massachusetts (click here) and New York (click here).
Many of the individual jurisdictions have published information about O-Zones. For example, the District of Columbia has a selection website (click here); Maryland’s can be located here; Virginia’s selections and interactive Map is located here. The 18 States and Territories with approved jurisdictions, and eventually all Zones once approved, can be found here. In the meantime, EIG has assembled a map here.