The "sin business" list did not change, but the final regulations allow for a de minimis amount of revenues and square footage to be related to sin businesses. For instance, it allows a hotel to have a bar or spa services.
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What changed in the final regulations to make OZs more beneficial for the hospitality industry?
I’m running a chain of motels and I heard that there were some updates to the “sin businesses” list that might allow motel owners to have a bar for example?
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Correct, as long as the income is not significant.
The new final regulations provide a de minimis rule that a QOZ business cannot lease more than 5% of its real property to a sin business. This could allow a bar.
Having a bar does not make you a sin business. A sin business for OZ purposes is for stores that sell alcohol for "off-site" consumption, for instance, a liquor store.
The sin businesses in QOFs aren't even really the big feature of the final regulations for hospitality. The best part for hotel developers is the changes to substantial improvement that allow FF&E (furniture, fixtures, and equipment) and other ancillary items to count toward the "double your basis" requirement.
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