Gov’t Shutdown Puts Opportunity-Zone Investors in Limbo

January 17, 2019

Investors who were planning to move quickly in the new year to take advantage of opportunity-zone tax incentives are putting on the brakes. They’re waiting for the U.S. Treasury Department to finalize guidance on precisely how the tax benefit will work before they proceed, and a timeline for that to happen has been thrown into doubt during the partial government shutdown, The Wall Street Journal reports.

Opportunity-zone provisions of the 2017 tax overhaul law offered investors in nearly 9,000 lower-income areas a deferral on capital gains taxes and an exemption on gains realized on investments held for at least a decade. The tax incentives were designed to help draw business investment to less affluent neighborhoods.

Last year, there was a surge in site acquisitions in these zones. Fifty-eight percent more deals in the zones in the third quarter of 2018 occurred compared to the same quarter in 2017, according to Real Capital Analytics data. But investors are now in a wait-and-see mode.

“The sooner you get regulatory clarity, the more benefit is available to investors and the sooner they can stand up a marketplace,” John Lettieri, chief executive of Economic Innovation Group, told WSJ.

The IRS canceled a public hearing on the issue last week and said a meeting would not be rescheduled until appropriations for the Department of the Treasury had been restored.

Government Shutdown Stymies Opportunity-Zone Investors,” The Wall Street Journal (Jan. 15, 2019)