II 

116TH CONGRESS 

2D SESSION S. 4780 

To amend the Internal Revenue Code of 1986 to provide for qualified 

Hurricane Laura recovery opportunity zones, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 1, 2020 

Mr. KENNEDY introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for qualified Hurricane Laura recovery opportunity 

zones, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Hurricane Laura Re5 covery Opportunity Zones Act’’. 

6 SEC. 2. QUALIFIED HURRICANE LAURA RECOVERY OPPOR7 TUNITY ZONES. 

8 (a) IN GENERAL.—Chapter 1 of the Internal Rev9 enue Code of 1986 is amended by adding at the end the 

10 following: 


kjohnson on DSK79L0C42PROD with BILLS
2 

•S 4780 IS

1 ‘‘Subchapter AA—Hurricane Laura Recovery 

2 Opportunity Zones 

‘‘Sec. 1400AA–1. Designation. 

‘‘Sec. 1400AA–2. Special rules for capital gains invested in Hurricane Laura 

Recovery Opportunity Zones. 

3 ‘‘SEC. 1400AA–1. DESIGNATION. 

4 ‘‘(a) QUALIFIED HURRICANE LAURA RECOVERY OP5 PORTUNITY ZONE DEFINED.—For purposes of this chap6 ter, the term ‘qualified Hurricane Laura recovery oppor7 tunity zone’ means any census tract that— 

8 ‘‘(1) is a low income community (as defined in 

9 section 1400Z–1(c)), and 

10 ‘‘(2) is located within the Hurricane Laura dis11 aster zone. 

12 ‘‘(b) QUALIFIED HURRICANE LAURA DISASTER

13 ZONE.—For purposes of this chapter, the term ‘qualified 

14 Hurricane Laura disaster zone’ means an area— 

15 ‘‘(1) with respect to which a major disaster has 

16 been declared by the President under section 401 of 

17 the Robert T. Stafford Disaster Relief and Emer18 gency Assistance Act before September 30, 2020, by 

19 reason of Hurricane Laura, and 

20 ‘‘(2) which has been determined by the Presi21 dent to warrant individual or individual and public 

22 assistance from the Federal Government under such 

23 Act by reason of Hurricane Laura. 


kjohnson on DSK79L0C42PROD with BILLS
3 

•S 4780 IS

1 ‘‘(c) PERIOD OF TREATMENT.—A census tract de2 scribed in subsection (a) shall not be treated as a qualified 

3 Hurricane Laura recovery opportunity zone— 

4 ‘‘(1) for any period before August 28, 2020, or 

5 ‘‘(2) for any period after the close of the 10th 

6 calendar year beginning on or after such date. 

7 ‘‘SEC. 1400AA–2. SPECIAL RULES FOR CAPITAL GAINS IN8 VESTED IN HURRICANE LAURA RECOVERY 

9 OPPORTUNITY ZONES. 

10 ‘‘(a) IN GENERAL.— 

11 ‘‘(1) TREATMENT OF GAINS.—In the case of 

12 capital gain from the sale to, or exchange with, an 

13 unrelated person of any property held by the tax14 payer, at the election of the taxpayer— 

15 ‘‘(A) gross income for the taxable year 

16 shall not include so much of such gain as does 

17 not exceed the aggregate amount invested by 

18 the taxpayer in a qualified Hurricane Laura re19 covery opportunity fund during the 180-day pe20 riod beginning on the date of such sale or ex21 change, 

22 ‘‘(B) the amount of gain excluded by sub23 paragraph (A) shall be included in gross income 

24 as provided by subsection (b), and 

25 ‘‘(C) subsection (c) shall apply. 


kjohnson on DSK79L0C42PROD with BILLS
4 

•S 4780 IS

1 The preceding sentence shall not apply in the case 

2 of any gain which is treated under this chapter as 

3 ordinary income. 

4 ‘‘(2) ELECTION.—No election may be made 

5 under paragraph (1)— 

6 ‘‘(A) with respect to a sale or exchange if 

7 an election previously made with respect to such 

8 sale or exchange is in effect, or 

9 ‘‘(B) with respect to any sale or exchange 

10 after December 31, 2030. 

11 ‘‘(b) DEFERRAL OF GAIN INVESTED IN OPPOR12 TUNITY ZONE PROPERTY.— 

13 ‘‘(1) YEAR OF INCLUSION.—Gain to which sub14 section (a)(1)(B) applies shall be included in income 

15 in the taxable year which includes the earlier of— 

16 ‘‘(A) the date on which such investment is 

17 sold or exchanged, or 

18 ‘‘(B) December 31, 2030. 

19 ‘‘(2) AMOUNT INCLUDIBLE.— 

20 ‘‘(A) IN GENERAL.—The amount of gain 

21 included in income under subsection (a)(1)(B) 

22 shall be the excess of— 

23 ‘‘(i) the lesser of the amount of gain 

24 excluded under subsection (a)(1)(A) or the 

25 fair market value of the investment as deVerDate Sep 11 2014 00:31 Oct 18, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4780.IS S4780

kjohnson on DSK79L0C42PROD with BILLS
5 

•S 4780 IS

1 termined as of the date described in para2 graph (1), over 

3 ‘‘(ii) the taxpayer’s basis in the in4 vestment. 

5 ‘‘(B) DETERMINATION OF BASIS.— 

6 ‘‘(i) IN GENERAL.—Except as other7 wise provided in this subparagraph or sub8 section (c), the taxpayer’s basis in the in9 vestment shall be zero. 

10 ‘‘(ii) INCREASE FOR GAIN RECOG11 NIZED UNDER SUBSECTION (a)(1)(B).— 

12 The basis in the investment shall be in13 creased by the amount of gain recognized 

14 by reason of subsection (a)(1)(B) with re15 spect to such investment. 

16 ‘‘(iii) INVESTMENTS HELD FOR 5

17 YEARS.—In the case of any investment 

18 held for at least 5 years, the basis of such 

19 investment shall be increased by an 

20 amount equal to 10 percent of the amount 

21 of gain deferred by reason of subsection 

22 (a)(1)(A). 

23 ‘‘(iv) INVESTMENTS HELD FOR 7

24 YEARS.—In the case of any investment 

25 held by the taxpayer for at least 7 years, 


kjohnson on DSK79L0C42PROD with BILLS
6 

•S 4780 IS

1 in addition to any adjustment made under 

2 clause (iii), the basis of such property shall 

3 be increased by an amount equal to 5 per4 cent of the amount of gain deferred by rea5 son of subsection (a)(1)(A). 

6 ‘‘(c) SPECIAL RULE FOR INVESTMENTS HELD FOR

7 AT LEAST 10 YEARS.—In the case of any investment held 

8 by the taxpayer for at least 10 years and with respect to 

9 which the taxpayer makes an election under this sub10 section, the basis of such investment shall be equal to the 

11 fair market value of such investment on the date that the 

12 investment is sold or exchanged. 

13 ‘‘(d) QUALIFIED HURRICANE LAURA RECOVERY OP14 PORTUNITY FUND.—For purposes of this section— 

15 ‘‘(1) IN GENERAL.—The term ‘qualified Hurri16 cane Laura recover opportunity fund’ means any in17 vestment vehicle which is organized as a corporation 

18 or a partnership for the purpose of investing in 

19 qualified Hurricane Laura recovery opportunity zone 

20 property (other than another qualified Hurricane 

21 Laura recovery opportunity fund) that holds at least 

22 90 percent of its assets in qualified Hurricane Laura 

23 recovery opportunity zone property, determined by 

24 the average of the percentage of qualified Hurricane 


kjohnson on DSK79L0C42PROD with BILLS
7 

•S 4780 IS

1 Laura recovery opportunity zone property held in 

2 the fund as measured— 

3 ‘‘(A) on the last day of the first 6-month 

4 period of the taxable year of the fund, and 

5 ‘‘(B) on the last day of the taxable year of 

6 the fund. 

7 ‘‘(2) QUALIFIED HURRICANE LAURA RECOVERY

8 OPPORTUNITY ZONE PROPERTY.— 

9 ‘‘(A) IN GENERAL.—The term ‘qualified 

10 Hurricane Laura recovery opportunity zone 

11 property’ means property which is— 

12 ‘‘(i) qualified Hurricane Laura recov13 ery opportunity zone stock, 

14 ‘‘(ii) qualified Hurricane Laura recov15 ery opportunity zone partnership interest, 

16 or 

17 ‘‘(iii) qualified Hurricane Laura re18 covery opportunity zone business property. 

19 ‘‘(B) QUALIFIED HURRICANE LAURA RE20 COVERY OPPORTUNITY ZONE STOCK.— 

21 ‘‘(i) IN GENERAL.—Except as pro22 vided in clause (ii), the term ‘qualified 

23 Hurricane Laura recovery opportunity 

24 zone stock’ means any stock in a domestic 

25 corporation if— 


kjohnson on DSK79L0C42PROD with BILLS
8 

•S 4780 IS

1 ‘‘(I) such stock is acquired by the 

2 qualified Hurricane Laura recovery 

3 opportunity fund after December 31, 

4 2020, at its original issue (directly or 

5 through an underwriter) from the cor6 poration solely in exchange for cash, 

7 ‘‘(II) as of the time such stock 

8 was issued, such corporation was a 

9 qualified Hurricane Laura recovery 

10 opportunity zone business (or, in the 

11 case of a new corporation, such cor12 poration was being organized for pur13 poses of being a qualified Hurricane 

14 Laura recovery opportunity zone busi15 ness), and 

16 ‘‘(III) during substantially all of 

17 the qualified Hurricane Laura recov18 ery opportunity fund’s holding period 

19 for such stock, such corporation quali20 fied as a qualified Hurricane Laura 

21 recovery opportunity zone business. 

22 ‘‘(ii) REDEMPTIONS.—A rule similar 

23 to the rule of section 1202(c)(3) shall 

24 apply for purposes of this paragraph. 


kjohnson on DSK79L0C42PROD with BILLS
9 

•S 4780 IS

1 ‘‘(C) QUALIFIED HURRICANE LAURA RE2 COVERY OPPORTUNITY ZONE PARTNERSHIP IN3 TEREST.—The term ‘qualified Hurricane Laura 

4 recovery opportunity zone partnership interest’ 

5 means any capital or profits interest in a do6 mestic partnership if— 

7 ‘‘(i) such interest is acquired by the 

8 qualified Hurricane Laura recovery oppor9 tunity fund after December 31, 2020, from 

10 the partnership solely in exchange for cash, 

11 ‘‘(ii) as of the time such interest was 

12 acquired, such partnership was a qualified 

13 Hurricane Laura recovery opportunity 

14 zone business (or, in the case of a new 

15 partnership, such partnership was being 

16 organized for purposes of being a qualified 

17 Hurricane Laura recovery opportunity 

18 zone business), and 

19 ‘‘(iii) during substantially all of the 

20 qualified Hurricane Laura recovery oppor21 tunity fund’s holding period for such inter22 est, such partnership qualified as a quali23 fied Hurricane Laura recovery opportunity 

24 zone business. 


kjohnson on DSK79L0C42PROD with BILLS
10 

•S 4780 IS

1 ‘‘(D) QUALIFIED HURRICANE LAURA RE2 COVERY OPPORTUNITY ZONE BUSINESS PROP3 ERTY.— 

4 ‘‘(i) IN GENERAL.—The term ‘quali5 fied Hurricane Laura recovery opportunity 

6 zone business property’ means tangible 

7 property used in a trade or business of the 

8 qualified Hurricane Laura recovery oppor9 tunity fund if— 

10 ‘‘(I) such property was acquired 

11 by the qualified Hurricane Laura re12 covery opportunity fund by purchase 

13 (as defined in section 179(d)(2)) after 

14 December 31, 2020, 

15 ‘‘(II) the original use of such 

16 property commences with the qualified 

17 Hurricane Laura recovery opportunity 

18 fund or the qualified Hurricane Laura 

19 recovery opportunity fund substan20 tially improves the property, and 

21 ‘‘(III) during substantially all of 

22 the qualified Hurricane Laura recov23 ery opportunity fund’s holding period 

24 for such property, substantially all of 

25 the use of such property was in a 


kjohnson on DSK79L0C42PROD with BILLS
11 

•S 4780 IS

1 qualified Hurricane Laura recovery 

2 opportunity zone. 

3 ‘‘(ii) SUBSTANTIAL IMPROVEMENT.— 

4 For purposes of clause (i)(II), property 

5 shall be treated as substantially improved 

6 by the qualified Hurricane Laura recovery 

7 opportunity fund only if, during any 30- 

8 month period beginning after the date of 

9 acquisition of such property, additions to 

10 basis with respect to such property in the 

11 hands of the qualified Hurricane Laura re12 covery opportunity fund exceed an amount 

13 equal to the adjusted basis of such prop14 erty at the beginning of such 30-month pe15 riod in the hands of the qualified Hurri16 cane Laura recovery opportunity fund. 

17 ‘‘(iii) RELATED PARTY.—For pur18 poses of clause (i)(I)— 

19 ‘‘(I) property shall not be treated 

20 as acquired by purchase if acquired 

21 from a related person (within the 

22 meaning of subsection (e)(2)), and 

23 ‘‘(II) section 179(d)(2) shall be 

24 applied without regard to subpara25 graph (A) thereof. 


kjohnson on DSK79L0C42PROD with BILLS
12 

•S 4780 IS

1 ‘‘(3) QUALIFIED HURRICANE LAURA RECOVERY

2 OPPORTUNITY ZONE BUSINESS.— 

3 ‘‘(A) IN GENERAL.—The term ‘qualified 

4 Hurricane Laura recovery opportunity zone 

5 business’ means a trade or business— 

6 ‘‘(i) in which substantially all of the 

7 tangible property owned or leased by the 

8 taxpayer is qualified Hurricane Laura re9 covery opportunity zone business property 

10 (determined by substituting ‘qualified Hur11 ricane Laura recovery opportunity zone 

12 business’ for ‘qualified Hurricane Laura 

13 recovery opportunity fund’ each place it 

14 appears in paragraph (2)(D)), 

15 ‘‘(ii) which satisfies the requirements 

16 of paragraphs (2), (4), and (8) of section 

17 1397C(b), and 

18 ‘‘(iii) which is not described in section 

19 144(c)(6)(B). 

20 ‘‘(B) SPECIAL RULE.—For purposes of 

21 subparagraph (A), tangible property that ceases 

22 to be a qualified Hurricane Laura recovery op23 portunity zone business property shall continue 

24 to be treated as a qualified Hurricane Laura reVerDate Sep 11 2014 00:31 Oct 18, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S4780.IS S4780

kjohnson on DSK79L0C42PROD with BILLS
13 

•S 4780 IS

1 covery opportunity zone business property for 

2 the lesser of— 

3 ‘‘(i) 5 years after the date on which 

4 such tangible property ceases to be so 

5 qualified, or 

6 ‘‘(ii) the date on which such tangible 

7 property is no longer held by the qualified 

8 Hurricane Laura recovery opportunity 

9 zone business. 

10 ‘‘(e) APPLICABLE RULES.— 

11 ‘‘(1) TREATMENT OF INVESTMENTS WITH

12 MIXED FUNDS.—In the case of any investment in a 

13 qualified Hurricane Laura recovery opportunity fund 

14 only a portion of which consists of investments of 

15 gain to which an election under subsection (a) is in 

16 effect— 

17 ‘‘(A) such investment shall be treated as 2 

18 separate investments, consisting of— 

19 ‘‘(i) one investment that only includes 

20 amounts to which the election under sub21 section (a) applies, and 

22 ‘‘(ii) a separate investment consisting 

23 of other amounts, and 


kjohnson on DSK79L0C42PROD with BILLS
14 

•S 4780 IS

1 ‘‘(B) subsections (a), (b), and (c) shall 

2 only apply to the investment described in sub3 paragraph (A)(i). 

4 ‘‘(2) RELATED PERSONS.—For purposes of this 

5 section, persons are related to each other if such 

6 persons are described in section 267(b) or 707(b)(1), 

7 determined by substituting ‘20 percent’ for ‘50 per8 cent’ each place it occurs in such sections. 

9 ‘‘(3) DECEDENTS.—In the case of a decedent, 

10 amounts includible in gross income under this sec11 tion shall, if not properly includible in the gross in12 come of the decedent, be includible in gross income 

13 as provided by section 691. 

14 ‘‘(4) REGULATIONS.—The Secretary shall pre15 scribe such regulations as may be necessary or ap16 propriate to carry out the purposes of this section, 

17 including— 

18 ‘‘(A) rules for the certification of qualified 

19 Hurricane Laura recovery opportunity funds for 

20 the purposes of this section, 

21 ‘‘(B) rules to ensure a qualified Hurricane 

22 Laura recovery opportunity fund has a reason23 able period of time to reinvest the return of 

24 capital from investments in qualified Hurricane 

25 Laura recovery opportunity zone stock and 


kjohnson on DSK79L0C42PROD with BILLS
15 

•S 4780 IS

1 qualified Hurricane Laura recovery opportunity 

2 zone partnership interests, and to reinvest pro3 ceeds received from the sale or disposition of 

4 qualified Hurricane Laura recovery opportunity 

5 zone property, and 

6 ‘‘(C) rules to prevent abuse. 

7 ‘‘(f) FAILURE OF QUALIFIED HURRICANE LAURA

8 RECOVERY OPPORTUNITY FUND TO MAINTAIN INVEST9 MENT STANDARD.— 

10 ‘‘(1) IN GENERAL.—If a qualified Hurricane 

11 Laura recovery opportunity fund fails to meet the 

12 90-percent requirement of subsection (d)(1), the 

13 qualified Hurricane Laura recovery opportunity fund 

14 shall pay a penalty for each month it fails to meet 

15 the requirement in an amount equal to the product 

16 of— 

17 ‘‘(A) the excess of— 

18 ‘‘(i) the amount equal to 90 percent of 

19 its aggregate assets, over 

20 ‘‘(ii) the aggregate amount of quali21 fied Hurricane Laura recovery opportunity 

22 zone property held by the fund, multiplied 

23 by 

24 ‘‘(B) the underpayment rate established 

25 under section 6621(a)(2) for such month. 


kjohnson on DSK79L0C42PROD with BILLS
16 

•S 4780 IS

1 ‘‘(2) SPECIAL RULE FOR PARTNERSHIPS.—In 

2 the case that the qualified Hurricane Laura recovery 

3 opportunity fund is a partnership, the penalty im4 posed by paragraph (1) shall be taken into account 

5 proportionately as part of the distributive share of 

6 each partner of the partnership. 

7 ‘‘(3) REASONABLE CAUSE EXCEPTION.—No 

8 penalty shall be imposed under this subsection with 

9 respect to any failure if it is shown that such failure 

10 is due to reasonable cause.’’. 

11 (b) BASIS ADJUSTMENTS.—Section 1016(a) of the 

12 Internal Revenue Code of 1986 is amended by striking 

13 ‘‘and’’ at the end of paragraph (37), by striking the period 

14 at the end of paragraph (38) and inserting ‘‘, and’’, and 

15 by inserting after paragraph (38) the following: 

16 ‘‘(39) to the extent provided in subsections 

17 (b)(2) and (c) of section 1400AA–2.’’. 

18 (c) CLERICAL AMENDMENT.—The table of sub19 chapters for chapter 1 of the Internal Revenue Code of 

20 1986 is amended by adding at the end the following new 

21 item: 

‘‘SUBCHAPTER AA. HURRICANE LAURA RECOVERY OPPORTUNITY ZONE’’. 

22 (d) EFFECTIVE DATE.—The amendments made by 

23 this section shall take effect on the date of the enactment 

24 of this Act. 


kjohnson on DSK79L0C42PROD with BILLS
17 

•S 4780 IS

1 SEC. 3. SENSE OF THE CONGRESS RELATING TO MAINTAIN2 ING CAPITAL GAINS RATES. 

3 It is the sense of Congress that the rate of tax on 

4 income from capital gains (as in effect on the date of the 

5 enactment of this Act) should not be changed. 

Æ 


kjohnson on DSK79L0C42PROD with BILLS