Overview
Treasury Releases Regulatory Plan for 2019
This week, the Treasury Department released its list of regulatory priorities for fiscal year 2019. Included in the plan is guidance on the computation of unrelated business taxable income for separate trades or businesses under new section 512(a)(6) and guidance on the excise tax on excess remuneration paid by tax-exempt organizations under section 4960.
IRS Releases Regulations on Opportunity Zone Investments
Today, the Treasury Department and the IRS released proposed regulations clarifying rules for investments in qualified opportunity zones (QOZs). The QOZ provision is an incentive created by the 2017 Tax Act (P. L. 115-97) to encourage investment in distressed communities by providing deferral of tax on invested gains and other tax benefits to investors in qualified opportunity funds (QOFs), which in turn invest in qualifying businesses in the QOZs. The regulations clarify that corporations, pass-through entities, and individuals may make investments in QOFs and elect to defer tax on all kinds of capital gains. The rules also provide clarity for QOFs and businesses operating in QOZs on meeting the statutory requirements. The proposed rules provide that a taxpayer may rely on them currently if the taxpayer applies the regulations for a particular subsection in their entirety and in a consistent manner.
IRS Issues Guidance on Opportunity Zone Property
In addition to the proposed regulations, the Treasury Department and the IRS issued Revenue Ruling 2018-29, providing rules and examples on meeting the substantial improvement test for investments in buildings in a QOZ. The revenue ruling provides that land is not included in determining whether property meets the threshold for being “substantially improved”.