January 7, 2019

In response to the Notice of Proposed Rulemaking from the U.S. Department of Treasury and Internal Revenue Service (IRS), Am Law 100 firm Polsinelli, as a member of the Economic Innovation Group (EIG), are part of the coalition’s letter commenting on the proposed regulations.  

The ruling from Treasury and the IRS involves key issues with investing in and forming Qualified Opportunity Zone Funds (“OZ Funds”) and the OZ Fund’s investments in Opportunity Zone Business. Polsinelli and EIG’s joint comment letter outlines a number of key aspects that are a priority in drawing investments to low-income communities across the country.

“Until final guidance is issued, our team continues to work daily with clients to structure compliant investments for funds, investors, developers and operating companies,” said Polsinelli Shareholder Korb Maxwell, also chair of the firm’s Opportunity Zones Practice Group.  

The Opportunity Zone program unveiled last summer allows taxpayers to re-invest private capital gains and defer and reduce capital gains taxes in “Qualified Opportunity Zones.”  Polsinelli’s Opportunity Zones Practice is focused on both shaping how the regulations are finalized, as well as working with clients on practical applications of these regulations.

An abbreviated summary of Polsinelli and EIG’s comment letter, submitted ahead of the closing period which occurred on Dec. 28, 2018, to Treasury and the IRS includes:

  • Requested additional guidance with final regulations interpreting the statute in ways that enable Opportunity Fund investments in operating businesses and real estate projects; Support of the proposed regulation’s 31-month safe harbor at the Qualified OZ Business level helping investors structure and time the acceptance of capital.
  • Requested additional flexibility for the 70 percent threshold for defining whether “substantially all” of a Qualified OZ Business’s tangible assets are located in a Qualified OZ.
  • Requested additional guidance with final regulations and removing barriers that prevent Qualified Opportunity Funds from forming, so that capital can flow to Opportunity Zones; and
  • Requested additional guidance for future proposed regulations and including reporting requirements that will provide sufficient information about investments in Opportunity Zones to inform investment and policy decisions.

According to the Treasury Department and the IRS, the agencies are “working on additional published guidance, including additional proposed regulations expected to be published in the near future.” The agencies expect to incorporate the guidance from the ruling to facilitate additional public input.  

Polsinelli’s Opportunity Zones Practice Group will continue to work alongside clients daily to offer many insights – from structuring long-term real estate and business investments, to fund formation, to reviewing tax requirements that optimize the full extent of the program.

About Polsinelli

Polsinelli is an Am Law 100 firm with more than 825 attorneys in 21 cities coast to coast. Ranked #30 for Client Service Excellence1 and #10 for best client relationships2 among 650 U.S. law firms, Polsinelli is also named among the top 30 best-known firms in the nation3 for the second consecutive year. The firm’s attorneys provide value through practical legal counsel infused with business insight, and focus on health care, financial services, real estate, intellectual property, mid-market corporate, labor and employment, and business litigation. | Polsinelli PC | In California, Polsinelli LLP

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