Sejin Park

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Sejin Park is an associate in the Tax Department. Sejin’s practice focuses on advising clients on tax matters in domestic and cross-border transactions related to capital markets, finance, mergers & acquisitions and bankruptcy.

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Introduction

On April 17, 2019, the Internal Revenue Service (the “IRS”) and the U.S. Department of the Treasury (the “Treasury”) issued a second set of proposed regulations (the “Proposed Regulations”) under section 1400Z-2 of the Internal Revenue Code (the “Code”) regarding the qualified opportunity zone program, which was enacted as part of the law commonly referred to as the “Tax Cuts and Jobs Act” (“TCJA”).[1]

The Proposed Regulations are very taxpayer friendly, and address some, but not all, of the questions that were left unanswered by the first set of proposed regulations issued in October 2018 (the “Initial Proposed Regulations”). The Initial Proposed Regulations were discussed here.

The Proposed Regulations generally are proposed to be effective on or after the date of the publication of final regulations. Nevertheless, taxpayers and qualified opportunity funds (“QOFs”) may generally rely on the Proposed Regulations, so long as the taxpayer and/or the QOF applies the Proposed Regulations consistently and in their entirety. However, taxpayers may not rely on the rules that permit a QOF partnership, S corporation, or REIT whose owners have held their QOF interests for at least 10 years to sell assets without its owners recognizing capital gains on the sale, until the Proposed Regulations are finalized.

Some states conform to federal tax law with respect to QOFs (and grant equivalent tax benefits); others do not and tax gains that would otherwise be deferred, reduced or eliminated under the opportunity zone program.

This blog summarizes some of the important aspects of the Proposed Regulations. It assumes familiarity with the opportunity zone program. For background, see our prior blog post.

On November 26, 2018, the Internal Revenue Service (the “IRS”) and the U.S. Department of the Treasury (the “Treasury”) issued proposed regulations (the “Proposed Regulations”) under section 163(j) of the Internal Revenue Code (the “Code”).[1]  Section 163(j) limits the deductibility of net business interest expense to 30% of “adjusted taxable income” plus “floor plan financing interest expense” for taxable years beginning after December 31, 2017.

The Proposed Regulations generally apply to taxable years ending after the date the Proposed Regulations are published as final regulations. However, taxpayers may elect to apply the Proposed Regulations retroactively to a taxable year beginning after December 31, 2017 so long as the taxpayer and any related parties consistently apply the Proposed Regulations to those taxable years.

This post provides background and a general summary of some of the most important aspects of the Proposed Regulations. For more information, please contact any of the Proskauer tax lawyers listed on this post or your regular Proskauer contact.  Click to read more about the Proposed Regulations.

The Tax Cuts and Jobs Act enacted section 1400Z-2 of the Internal Revenue Code, which created the qualified opportunity zone program. The program is designed to encourage investment in distressed communities designated as “qualified opportunity zones” by providing tax incentives to invest in “qualified opportunity funds” (“opportunity funds”) that, in…