Baker McKenzie’s North America Tax Practice Group has prepared a Tax News and Developments Client Alert on the proposed regulations relating to QOZ that were released on April 17, 2019 and published in the Federal Register on May 1, 2019. The proposed regulations provide much-needed clarity to taxpayers seeking to obtain the tax benefits of the QOZ program. A wide range of QOZ topics, including the following, are covered by the proposed regulations: the original use and substantial improvement tests; qualifying investments in qualified opportunity funds; transactions triggering recognition of initially deferred gain; treatment of leased property as qualified opportunity zone business property; 50% gross income test for qualified opportunity zone businesses; debt-financed distributions by qualified opportunity funds; and reinvestment of proceeds by qualified opportunity funds.
Our Client Alert provides an in-depth analysis of how the proposed regulations will impact funds and investors -- the analysis is presented in accordance with a qualified opportunity fund’s life cycle: formation, operation, and exit. A summary chart at the end of the Client Alert especially highlights Baker McKenzie’s observations and takeaways on some of the key aspects of the QOZ program.
Please do not hesitate to contact the indicated authors of the alert or any member of our North America Tax Practice Group if you would like additional information or for further discussion of the issues addressed.