I 

118TH CONGRESS 

2D SESSION H. R. 9203 

To amend the Internal Revenue Code of 1986 to establish special rules 

for capital gains invested in brownfield and superfund sites. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 30, 2024 

Mr. EDWARDS (for himself and Mr. NICKEL) introduced the following bill; 

which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to establish 

special rules for capital gains invested in brownfield and 

superfund sites. 

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 ‘‘Economic Opportunity 

5 for Distressed Communities Act’’. 


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1 SEC. 2. ESTABLISHMENT OF SPECIAL RULES FOR CAPITAL 

2 GAINS INVESTED IN DISTRESSED OPPOR3 TUNITY ZONES. 

4 (a) IN GENERAL.—Subchapter Z of chapter 1 of the 

5 Internal Revenue Code of 1986 is amended by adding at 

6 the end the following new section: 

7 ‘‘SEC. 1400Z–3. SPECIAL RULES FOR CAPITAL GAINS IN8 VESTED IN DISTRESSED OPPORTUNITY 

9 ZONES. 

10 ‘‘(a) IN GENERAL.— 

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

12 capital gains 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 distressed oppor19 tunity fund during the 180-day period begin20 ning on the date of such sale or exchange, 

21 ‘‘(B) the amount of gain excluded by sub22 paragraph (A) shall be included in gross income 

23 as provided by subsection (b), and 

24 ‘‘(C) subsection (c) shall apply. 

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

26 under paragraph (1)— 


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

2 an election previously made with respect to such 

3 sale or exchange is in effect, or 

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

5 after December 31, 2032. 

6 ‘‘(b) DEFERRAL OF GAIN INVESTED IN QUALIFIED

7 DISTRESSED OPPORTUNITY ZONE PROPERTY.— 

8 ‘‘(1) YEAR OF INCLUSION.—Gain to which sub9 section (a)(1)(B) applies shall be included in income 

10 in the taxable year which includes the earlier of— 

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

12 sold or exchanged, or 

13 ‘‘(B) December 31, 2032. 

14 ‘‘(2) AMOUNT INCLUDIBLE.— 

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

16 included in gross income under subsection 

17 (a)(1)(A) shall be the excess of— 

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

19 excluded under paragraph (1) or the fair 

20 market value of the investment as deter21 mined as of the date described in para22 graph (1), over 

23 ‘‘(ii) the taxpayer’s basis in the in24 vestment. 


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1 ‘‘(B) DETERMINATION OF BASIS QUALI2 FIED DISTRESSED OPPORTUNITY ZONE PROP3 ERTY.— 

4 ‘‘(i) IN GENERAL.—Except as other5 wise provided in this clause or subsection 

6 (c), the taxpayer’s basis in the investment 

7 shall be zero. 

8 ‘‘(ii) INCREASE FOR GAIN RECOG9 NIZED UNDER SUBSECTION (a)(1)(B).— 

10 The basis in the investment shall be in11 creased by the amount of gain recognized 

12 by reason of subsection (a)(1)(B) with re13 spect to such property. 

14 ‘‘(iii) INVESTMENTS HELD FOR 5

15 YEARS.—In the case of any investment 

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

17 investment shall be increased by an 

18 amount equal to 10 percent of the amount 

19 of gain deferred by reason of subsection 

20 (a)(1)(A). 

21 ‘‘(iv) INVESTMENTS HELD FOR 7

22 YEARS.—In the case of any investment 

23 held by the taxpayer for at least 7 years, 

24 in addition to any adjustment made under 

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


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1 be increased by an amount equal to 5 per2 cent of the amount of gain deferred by rea3 son of subsection (a)(1)(A). 

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

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

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

7 which the taxpayer makes an election under this sub8 section, the basis of such property shall be equal to the 

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

10 investment is sold or exchanged. 

11 ‘‘(d) QUALIFIED DISTRESSED OPPORTUNITY

12 FUND.—For purposes of this section— 

13 ‘‘(1) IN GENERAL.—The term ‘qualified dis14 tressed opportunity fund’ means any investment ve15 hicle which is organized as a corporation or a part16 nership for the purpose of investing in qualified dis17 tressed opportunity zone property (other than an18 other qualified distressed opportunity fund) that 

19 holds at least 90 percent of its assets in qualified 

20 distressed opportunity zone property, determined by 

21 the average of the percentage of qualified distressed 

22 opportunity zone property held in the fund as meas23 ured— 

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

25 period of the taxable year of the fund, and 


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

2 the fund. 

3 ‘‘(2) QUALIFIED DISTRESSED OPPORTUNITY

4 ZONE PROPERTY.— 

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

6 distressed opportunity zone property’ means 

7 property which is— 

8 ‘‘(i) qualified distressed opportunity 

9 zone stock, 

10 ‘‘(ii) qualified distressed opportunity 

11 zone partnership interest, or 

12 ‘‘(iii) qualified distressed opportunity 

13 zone business property. 

14 ‘‘(B) QUALIFIED DISTRESSED OPPOR15 TUNITY ZONE STOCK.— 

16 ‘‘(i) IN GENERAL.—Except as pro17 vided in clause (ii), the term ‘qualified dis18 tressed opportunity zone stock’ means any 

19 stock in a domestic corporation if— 

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

21 qualified distressed opportunity fund 

22 after December 31, 2024, at its origi23 nal issue (directly or through an un24 derwriter) from the corporation solely 

25 in exchange for cash, 


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1 ‘‘(II) as of the time such stock 

2 was issued, such corporation was a 

3 qualified distressed opportunity zone 

4 business (or, in the case of a new cor5 poration, such corporation was being 

6 organized for purposes of being a 

7 qualified distressed opportunity zone 

8 business), and 

9 ‘‘(III) during substantially all of 

10 the qualified distressed opportunity 

11 fund’s holding period for such stock, 

12 such corporation qualified as a quali13 fied distressed opportunity zone busi14 ness. 

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

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

17 apply for purposes of this paragraph. 

18 ‘‘(C) QUALIFIED DISTRESSED OPPOR19 TUNITY ZONE PARTNERSHIP INTEREST.—The 

20 term ‘qualified distressed opportunity zone 

21 partnership interest’ means any capital or prof22 its interest in a domestic partnership if— 

23 ‘‘(i) such interest in acquired by the 

24 qualified distressed opportunity fund after 


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1 December 31, 2024, from the partnership 

2 solely in exchange for cash, 

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

4 acquired, such partnership was a qualified 

5 distressed opportunity zone business (or, in 

6 the case of a new partnership, such part7 nership was being organized for purposes 

8 of being a qualified distressed opportunity 

9 zone business), and 

10 ‘‘(iii) during substantially all of the 

11 qualified distressed opportunity fund’s 

12 holding period for such interest, such part13 nership qualified as a qualified distressed 

14 opportunity zone business. 

15 ‘‘(D) QUALIFIED DISTRESSED OPPOR16 TUNITY ZONE BUSINESS PROPERTY.— 

17 ‘‘(i) IN GENERAL.—The term ‘quali18 fied distressed opportunity zone business 

19 property’ means tangible property used in 

20 a trade or business of the qualified dis21 tressed opportunity fund if— 

22 ‘‘(I) such property was acquired 

23 by the qualified distressed opportunity 

24 fund by purchase (as defined in secVerDate Sep 11 2014 19:33 Aug 29, 2024 Jkt 049200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H9203.IH H9203

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1 tion 179(d)(2)) after December 31, 

2 2024, 

3 ‘‘(II) the original use of such 

4 property in the qualified distressed 

5 opportunity zone commences with the 

6 qualified distressed opportunity fund 

7 or the qualified distressed opportunity 

8 fund substantially improves the prop9 erty, and 

10 ‘‘(III) during substantially all of 

11 the qualified distressed opportunity 

12 fund’s holding period for such prop13 erty, substantially all of the use of 

14 such property was in a qualified dis15 tressed opportunity zone. 

16 ‘‘(ii) SUBSTANTIAL IMPROVEMENT.— 

17 For purposes of subparagraph (A)(ii), 

18 property shall be treated as substantially 

19 improved by the qualified distressed oppor20 tunity fund only if, during any 30-month 

21 period beginning after the date of acquisi22 tion of such property, additions to basis 

23 with respect to such property in the hands 

24 of the qualified distressed opportunity fund 

25 exceed an amount equal to the adjusted 


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1 basis of such property at the beginning of 

2 such 30-month period in the hands of the 

3 qualified distressed opportunity fund. 

4 ‘‘(iii) RELATED PARTY.—For pur5 poses of subparagraph (A)(i), the related 

6 person rule of section 179(d)(2) shall be 

7 applied pursuant to subsection (e)(2) in 

8 lieu of the application of such rule in sec9 tion 179(d)(2)(A). 

10 ‘‘(3) QUALIFIED DISTRESSED OPPORTUNITY

11 ZONE BUSINESS.— 

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

13 distressed opportunity zone business’ means a 

14 trade or business— 

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

16 tangible property owned or leased by the 

17 taxpayer is qualified distressed opportunity 

18 zone business property (determined by sub19 stituting ‘qualified distressed opportunity 

20 zone business’ for ‘qualified distressed op21 portunity fund’ each place it appears in 

22 subparagraph (D)), 

23 ‘‘(ii) which satisfies the requirements 

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

25 1397C(b), and 


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

2 144(c)(6)(B). 

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

4 subparagraph (A), tangible property that ceases 

5 to be a qualified distressed opportunity zone 

6 business property shall continue to be treated 

7 as a qualified distressed opportunity zone busi8 ness property for the lesser of— 

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

10 such tangible property ceases to be so 

11 qualified, or 

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

13 property is no longer held by the qualified 

14 distressed opportunity zone business. 

15 ‘‘(4) QUALIFIED DISTRESSED OPPORTUNITY

16 ZONE.—The term ‘qualified distressed opportunity 

17 zone’ means— 

18 ‘‘(A) a brownfield site (as defined in sec19 tion 101(39) of the Comprehensive Environ20 mental Response, Compensation, and Liability 

21 Act of 1980), or 

22 ‘‘(B) a facility that is included on the Na23 tional Priorities List developed by the President 

24 in accordance with section 105(a)(8)(B) of the 


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1 Comprehensive Environmental Response, Com2 pensation, and Liability Act of 1980. 

3 ‘‘(e) APPLICABLE RULES.— 

4 ‘‘(1) TREATMENT OF INVESTMENTS WITH

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

6 qualified distressed opportunity fund only a portion 

7 of which consists of investments of gain to which an 

8 election under subsection (a) is in effect— 

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

10 separate investments, consisting of— 

11 ‘‘(i) one investment that only includes 

12 amounts to which the election under sub13 section (a) applies, and 

14 ‘‘(ii) a separate investment consisting 

15 of other amounts, and 

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

17 only apply to the investment described in sub18 paragraph (A)(i). 

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

20 section, persons are related to each other if such 

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

22 determined by substituting ‘20 percent’ for ‘50 per23 cent’ each place it occurs in such sections. 

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

25 amounts recognized under this section shall, if not 


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1 properly includible in the gross income of the dece2 dent, be included in gross income as provided by sec3 tion 691. 

4 ‘‘(4) REGULATIONS.—The Secretary shall pre5 scribe such regulations as may be necessary or ap6 propriate to carry out the purposes of this section, 

7 including— 

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

9 distressed opportunity funds for the purposes of 

10 this section, 

11 ‘‘(B) rules to ensure a qualified distressed 

12 opportunity fund has a reasonable period of 

13 time to reinvest the return of capital from in14 vestments in qualified distressed opportunity 

15 zone stock and qualified distressed opportunity 

16 zone partnership interests, and to reinvest pro17 ceeds received from the sale or disposition of 

18 qualified distressed opportunity zone property, 

19 and 

20 ‘‘(C) rules to prevent abuse. 

21 ‘‘(f) FAILURE OF QUALIFIED DISTRESSED OPPOR22 TUNITY FUND TO MAINTAIN INVESTMENT STANDARD.— 

23 ‘‘(1) IN GENERAL.—If a qualified distressed op24 portunity fund fails to meet the 90-percent require25 ment of subsection (d)(1), the qualified distressed 


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1 opportunity fund shall pay a penalty for reach 

2 month it fails to meet the requirement in an amount 

3 equal to the product of— 

4 ‘‘(A) the excess of— 

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

6 its aggregate assets, over 

7 ‘‘(ii) the aggregate amount of quali8 fied distressed opportunity zone property 

9 held by the fund, multiplied by 

10 ‘‘(B) the underpayment rate established 

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

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

13 the case that the qualified distressed opportunity 

14 fund is a partnership, the penalty imposed by para15 graph (1) shall be taken int account proportionately 

16 as part of the distributive share of each partner of 

17 the partnership. 

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

19 penalty shall be imposed under this subsection with 

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

21 is due to reasonable cause.’’. 

22 (b) CLERICAL AMENDMENT.—The table of sections 

23 for subchapter Z of chapter 1 is amended by adding at 

24 the end the following new item: 

‘‘Sec. 1400Z–3. Special rules for capital gains invested in distressed opportunity zones.’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to amounts invested after the date 

3 of the enactment of this Act. 

Æ 


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