OPPORTUNITY ZONES IN THE BIDEN ADMINISTRATION AND THE NEW CONGRESS
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Some of these ideas could be accomplished through regulatory or other executive action , while others will require legislative change . They are generally consistent with the principles behind bipartisan proposals that were introduced in the last congress and will need to be reintroduced or that are under development for introduction in the new congress , including enhanced information reporting requirements that will provide greater transparency regarding the investments being made and the impacts they are having in the zones . Current Treasury and IRS reporting requirements are focused on the information necessary to administer and enforce the tax aspects of OZ rules and regulations ; officials say requiring impact reporting is outside the purview of tax administration . Increased information reporting requirements will create additional work for those required to submit the data , but many view this as a reasonable trade-off to be able to demonstrate the effectiveness of the OZ incentive and in light of the considerable tax benefits .
Other proposals not mentioned in the BBB plan but under consideration on the Hill include :
• rescinding certain designated zones that may have met the technical criteria but not the spirit of the legislation and replacing them with zones that do ,
• extending the time frames to qualify for deferral of tax on capital gains originally invested and the full 15 % step-up in basis , and
• providing a mechanism to facilitate the launch of OZ projects and businesses .
Biden ’ s BBB plan proposed three primary revisions to the OZ program to fulfill its promise
• Make OZ investments transparent by requiring recipients of the OZ tax benefit to provide detailed reporting and public disclosure of their investments and the impact they have on poverty status , affordable housing , and jobs in the zones .
• Requiring the Department of Treasury ( Treasury ) to review OZ investments to ensure OZ benefits are allowed only when the investments result in clear economic , social and environmental benefits to a distressed community .
Uncertainties arising from COVID-19 , including demand for commercial space and business services , the value of property , the ability to obtain financing , and the extent of the overall economic impact of COVID , as well as government-mandated shutdowns and social distancing protocols , resulted in the pause or discontinuance of many OZ investments , developments and businesses as stakeholders rode out the pandemic . Many potential OZ entrepreneurs and developers have great ideas but lack the know-how to launch a business . These proposals would mitigate some of these challenges and encourage the use of OZ .
Although the original legislation that was the precursor to OZ was bipartisan in nature , many Democrats in congress have been particularly critical of the incentive since its enactment in the Republican-led Tax Cuts and Jobs Act ( TCJA ). However , Democratic mayors and others in the party are strong proponents , a force that Washington , DC lawmakers cannot ignore . Now that the party controls both the House and the Senate , they will have more control over what legislative changes are made to OZ . However , they will still need to coordinate with Republicans since issues like enhanced information reporting will require 60 votes in the Senate . Because it is not considered to have a budgetary impact , the budget reconciliation process that requires only 51 votes in the Senate ( and is expected to be used by Democrats during this session of congress to make other changes to the tax code ) cannot be used for information reporting . This was the mechanism used for the TCJA and provisions to measure impact were struck from the bill for that reason .
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