What changes or new regulations can we anticipate to the OZ program as a result of the election outcome?
I think that will depend on whether the Senate holds GOP or whether the Democratic Party controls. If the Democratic Party controls, there are some in its caucus that would like to restrict some of the luxury apartment buildings in Opportunity Zones. I believe existing projects would be grandfathered but that might have a sympathetic audience to restrict to affordable housing.
I think what you can count on is more reporting requirements and more monitoring of the program. The Biden campaign platform keeps OZs, so there is no imminent worry of a repeal. What might change is that subsequent legislation may change the zones based on 2020 census results, but only PROSPECTIVELY, not retroactively. So if you already made an investment based on the zones as is, you'll be fine, but any investments after the new legislation would need to be made in zones that were redrawn based on 2020 census data. Keep an eye out for that possibility.
As a result of the election outcome, I do not expect any radical changes to the Opportunity Zone program. Biden’s plan regarding OZs can be found on his website and lists three potential changes to the investment requirements. First, Biden wants to incentivize Opportunity Funds to partner with non-profit or community-oriented organizations and jointly produce a community-benefit plan for each investment, with a focus on creating jobs for low-income residents and otherwise providing a direct financial impact to households within the Opportunity Zones. The interesting word here is “incentivize,” as additional tax incentives could potentially be offered to investors who produce a community-benefit plan for their investment. Developing a community-benefit plan shouldn’t be too difficult, as local officials welcome OZ investments, and creating jobs for local residents is achieved when adding a new opportunity zone business in the area. Second, Biden wants Opportunity Zone investments to be reviewed by the Department of Treasury to ensure tax benefits are only being allowed where there are clear economic, social, and environmental benefits to a community. In light of the current OZ rules prohibiting “sin businesses,” I don’t foresee the Treasury denying most types of opportunity zone investments, so long as they create jobs or improve the quality of life for residents in the area. Still, it is a possibility that investors will need to obtain a certification from the Treasury before investing, similar to the current requirements for New Market Tax Credits. Lastly, Biden wants Opportunity Zone investors to increase reporting on how their investments impact local residents, including poverty status, housing affordability, and job creation. This shouldn’t be too difficult to identify for most investments, and investors will likely only need to include some additional data each year on their Form 8996.
Fortunately, the Opportunity Zone program is highly bipartisan and an integral part of the Biden Build Back Better program. There may be more to come in terms of reporting and impact but there is no apparent concern of the program disappearing.
DISCLAIMER:the information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal and financial experts prior to participating in any aspect relating to Opportunity Zones. Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.