AICPA comments on proposed tax regulations for investing in Qualified Opportunity Zones

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.