I 

114TH CONGRESS 

2D SESSION H. R. 5082 

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

of inclusion in gross income for capital gains reinvested in economically 

distressed zones. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 27, 2016 

Mr. TIBERI (for himself, Mr. KIND, Mr. BOUSTANY, Mr. YOUNG of Indiana, 

Mr. REED, Mr. DOLD, Mr. YODER, Mr. CURBELO of Florida, Mr. ROSKAM, Mr. BLUMENAUER, Mr. KILMER, Mr. POLIS, Mr. SMITH of Missouri, Ms. DELBENE, Mr. LARSEN of Washington, Ms. SEWELL of Alabama, Mr. MEEHAN, Mr. NUNES, Mr. JOYCE, Mrs. TORRES, Mr. UPTON, 

and Mr. LARSON of Connecticut) 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 provide 

for the deferral of inclusion in gross income for capital 

gains reinvested in economically distressed zones. 

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 ‘‘Investing in Oppor5 tunity Act’’. 


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1 SEC. 2. OPPORTUNITY ZONES. 

2 (a) IN GENERAL.—Chapter 1 of the Internal Rev3 enue Code of 1986 is amended by adding at the end the 

4 following: 

5 ‘‘Subchapter Z—Opportunity Zones 

‘‘Sec. 1400Z–1. Designation. 

‘‘Sec. 1400Z–2. Temporary capital gains deferral. 

6 ‘‘SEC. 1400Z–1. DESIGNATION. 

7 ‘‘(a) QUALIFIED OPPORTUNITY ZONE DEFINED.— 

8 For the purposes of this subchapter, the term ‘qualified 

9 opportunity zone’ means a population census tract that 

10 is a low-income community that is designated as a quali11 fied opportunity zone. 

12 ‘‘(b) DESIGNATION.— 

13 ‘‘(1) GOVERNOR.— 

14 ‘‘(A) IN GENERAL.—For purposes of sub15 section (a), a population census tract that is a 

16 low-income community is designated as a quali17 fied opportunity zone if— 

18 ‘‘(i) not later than the end of the de19 termination period, the governor of the 

20 State in which the tract is located— 

21 ‘‘(I) nominates the tract for des22 ignation as a qualified opportunity 

23 zone, and 


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1 ‘‘(II) notifies the Secretary in 

2 writing of such nomination, and 

3 ‘‘(ii) the Secretary certifies such nomi4 nation and designates such tract as a 

5 qualified opportunity zone before the end 

6 of the consideration period. 

7 ‘‘(B) EXTENSION OF PERIODS.—A gov8 ernor may request that the Secretary extend ei9 ther the determination or consideration period, 

10 or both (determined without regard to this sub11 paragraph), for an additional 30 days. 

12 ‘‘(C) DEEMED DESIGNATION IF SEC13 RETARY FAILS TO ACT.—Unless the tracts are 

14 ineligible for designation, if the Secretary de15 clines in writing to make such certification and 

16 designation or fails to act before the end of the 

17 consideration period, such nomination shall be 

18 deemed to be certified and designated, effective 

19 on the day after the last day of the consider20 ation period. 

21 ‘‘(2) SECRETARY.—If a governor fails to make 

22 the nominations and notifications by the end of the 

23 periods referred to in paragraphs (1)(A) and (1)(B), 

24 the Secretary shall designate and certify population 

25 census tracts that are low-income communities as 


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1 qualified opportunity zones, as permitted by sub2 section (e). 

3 ‘‘(c) OTHER DEFINITIONS.—For purposes of this 

4 subsection— 

5 ‘‘(1) LOW-INCOME COMMUNITIES.—The term 

6 ‘low-income community’ has the same meaning as 

7 when used in section 45D(e). 

8 ‘‘(2) DEFINITION OF PERIODS.— 

9 ‘‘(A) CONSIDERATION PERIOD.—The term 

10 ‘consideration period’ means the 30-day period 

11 beginning on the date on which the Secretary 

12 receives notice under subsection 

13 (b)(1)(A)(i)(II), as extended under subsection 

14 (b)(1)(B). 

15 ‘‘(B) DETERMINATION PERIOD.—The term 

16 ‘determination period’ means the 90-day period 

17 beginning on the date of the enactment of the 

18 Investing in Opportunity Act, as extended 

19 under subsection (b)(1)(B). 

20 ‘‘(d) GUIDANCE FOR OPPORTUNITY ZONE NOMINA21 TIONS.—When considering the nomination of qualified op22 portunity zones, governors should strive for the creation 

23 of qualified opportunity zones that are geographically con24 centrated and contiguous clusters of population census 


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1 tracts and should give particular consideration to areas 

2 that— 

3 ‘‘(1) are currently the focus of mutually rein4 forcing State, local, or private economic development 

5 initiatives to attract investment and foster startup 

6 activity, 

7 ‘‘(2) have demonstrated success in geographi8 cally targeted development programs, such as prom9 ise zones, new market tax credit, empowerment 

10 zones, and renewal communities, and 

11 ‘‘(3) have recently experienced significant lay12 offs due to business closures or relocations. 

13 ‘‘(e) NUMBER OF DESIGNATIONS.— 

14 ‘‘(1) IN GENERAL.—Except as provided by 

15 paragraph (2), the number of population census 

16 tracts in a State that may be designated as qualified 

17 opportunity zones under this section may not exceed 

18 25 percent of the number of low-income communities 

19 in the State. 

20 ‘‘(2) EXCEPTION.—If the number of low-income 

21 communities in a State is less than 100, then a total 

22 of 25 of such tracts may be designated as qualified 

23 opportunity zones. 

24 ‘‘(f) DESIGNATION OF TRACTS CONTIGUOUS WITH

25 LOW-INCOME COMMUNITIES.— 


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1 ‘‘(1) IN GENERAL.—A population census tract 

2 that is not a low-income community may be des3 ignated as a qualified opportunity zone under this 

4 section if— 

5 ‘‘(A) the tract is contiguous with the low6 income community that is designated as a 

7 qualified opportunity zone, and 

8 ‘‘(B) the median family income of the tract 

9 does not exceed 125 percent of the median fam10 ily income of the low-income community with 

11 which the tract is contiguous. 

12 ‘‘(2) LIMITATION.—Not more than 5 percent of 

13 the population census tracts designated in a State as 

14 a qualified opportunity zone may be designated 

15 under paragraph (1). 

16 ‘‘(g) PERIOD FOR WHICH DESIGNATION IS IN EF17 FECT.—A designation as a qualified opportunity zone 

18 shall remain in effect for the period beginning on the date 

19 of the designation and ending at the close of the 10th cal20 endar year beginning on or after such date of designation. 

21 ‘‘SEC. 1400Z–2. TEMPORARY CAPITAL GAINS DEFERRAL FOR 

22 GAIN INVESTED IN OPPORTUNITY ZONES. 

23 ‘‘(a) IN GENERAL.— 

24 ‘‘(1) MAXIMUM AMOUNT OF GAIN.—Qualified 

25 capital gain from the sale or exchange to an unreVerDate Sep 11 2014 01:29 May 04, 2016 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5082.IH H5082

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1 lated person of any asset held by the taxpayer and 

2 which the taxpayer elects the application of this sec3 tion shall be the amount by which the amount real4 ized on such sale or exchange exceeds— 

5 ‘‘(A) the sum of— 

6 ‘‘(i) the cost of any qualified oppor7 tunity zone asset acquired by the taxpayer 

8 during the 180-day period beginning on 

9 the date of such sale, plus 

10 ‘‘(ii) the amount invested in a quali11 fied opportunity fund acquired by the tax12 payer during the 180-day period beginning 

13 on the date of such sale, reduced by 

14 ‘‘(B) any portion of such cost and invest15 ment previously taken into account under this 

16 section. 

17 ‘‘(2) AMOUNT OF GAIN RECOGNIZED.—The 

18 amount recognized from the sale or exchange of an 

19 asset which is subject to paragraph (1) shall be the 

20 amount equal to the qualified capital gain multiplied 

21 by the same ratio as— 

22 ‘‘(A) the excess of the total amount real23 ized on such sale or exchange over the sum of 

24 the amounts determined under clauses (A)(i), 

25 (A)(ii), and (B) of paragraph (1), bears to 


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1 ‘‘(B) the total amount realized on such 

2 sale or exchange. 

3 ‘‘(3) AMOUNT OF GAIN DEFERRED.—Except as 

4 provided by subsection (c), any amount of qualified 

5 capital gain not recognized by reason of paragraph 

6 (2) shall be recognized on the earlier of— 

7 ‘‘(A) the date on which such qualified op8 portunity zone asset or investment with respect 

9 to which such qualified capital gain is allocated 

10 is disposed of, except to the extent an addi11 tional deferral is provided under paragraph (1) 

12 with respect to such disposition by reason of the 

13 acquisition of a qualified opportunity zone asset 

14 or investment in a qualified opportunity fund, 

15 or 

16 ‘‘(B) December 31, 2025. 

17 ‘‘(b) QUALIFIED OPPORTUNITY ZONE ASSET.—For 

18 purposes of this section: 

19 ‘‘(1) IN GENERAL.—The term ‘qualified oppor20 tunity zone asset’ means— 

21 ‘‘(A) any qualified opportunity zone stock, 

22 ‘‘(B) any qualified opportunity zone part23 nership interest, and 

24 ‘‘(C) any qualified opportunity zone busi25 ness property. 


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1 ‘‘(2) QUALIFIED OPPORTUNITY ZONE STOCK.— 

2 ‘‘(A) IN GENERAL.—Except as provided in 

3 subparagraph (B), the term ‘qualified oppor4 tunity zone stock’ means any stock in a domes5 tic corporation if— 

6 ‘‘(i) such stock is acquired by the tax7 payer after December 31, 2016, at its 

8 original issue (directly or through an un9 derwriter) from the corporation solely in 

10 exchange for cash, 

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

12 issued, such corporation was a qualified 

13 opportunity zone business (or, in the case 

14 of a new corporation, such corporation was 

15 being organized for purposes of being a 

16 qualified opportunity zone business), and 

17 ‘‘(iii) during substantially all of the 

18 taxpayer’s holding period for such stock, 

19 such corporation qualified as a qualified 

20 opportunity zone business. 

21 ‘‘(B) REDEMPTIONS.—A rule similar to 

22 the rule of section 1202(c)(3) shall apply for 

23 purposes of this paragraph. 

24 ‘‘(3) QUALIFIED OPPORTUNITY ZONE PARTNER25 SHIP INTEREST.—The term ‘qualified opportunity 


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1 zone partnership interest’ means any capital or prof2 its interest in a domestic partnership if— 

3 ‘‘(A) such interest is acquired by the tax4 payer after December 31, 2016, from the part5 nership solely in exchange for cash, 

6 ‘‘(B) as of the time such interest was ac7 quired, such partnership was a qualified oppor8 tunity zone business (or, in the case of a new 

9 partnership, such partnership was being orga10 nized for purposes of being a qualified oppor11 tunity zone business), and 

12 ‘‘(C) during substantially all of the tax13 payer’s holding period for such interest, such 

14 partnership qualified as a qualified opportunity 

15 zone business. 

16 ‘‘(4) QUALIFIED OPPORTUNITY ZONE BUSINESS

17 PROPERTY.— 

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

19 opportunity zone business property’ means tan20 gible property used in a trade or business of the 

21 taxpayer if— 

22 ‘‘(i) such property was acquired by 

23 the taxpayer by purchase (as defined in 

24 section 179(d)(2)) after December 31, 

25 2016, 


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1 ‘‘(ii) the original use of such property 

2 in the qualified opportunity zone com3 mences with the taxpayer or the taxpayer 

4 substantially improves the property, and 

5 ‘‘(iii) during substantially all of the 

6 taxpayer’s holding period for such prop7 erty, substantially all of the use of such 

8 property was in a qualified opportunity 

9 zone. 

10 ‘‘(B) SUBSTANTIAL IMPROVEMENT.—For 

11 purposes of subparagraph (A)(ii), property shall 

12 be treated as substantially improved by the tax13 payer only if, during any 30-month period be14 ginning after the date of acquisition of such 

15 property, additions to basis with respect to such 

16 property in the hands of the taxpayer exceed an 

17 amount equal to the adjusted basis of such 

18 property at the beginning of such 30-month pe19 riod in the hands of the taxpayer. 

20 ‘‘(C) RELATED PARTY.—For purposes of 

21 subparagraph (A)(i), the related person rule of 

22 section 179(d)(2) shall be applied pursuant to 

23 paragraph (8) of this subsection in lieu of the 

24 application of such rule in section 179(d)(2)(A). 

25 ‘‘(5) QUALIFIED CAPITAL GAIN.— 


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1 ‘‘(A) IN GENERAL.—Except as otherwise 

2 provided in this subsection, the term ‘qualified 

3 capital gain’ means any gain recognized on the 

4 sale or exchange of— 

5 ‘‘(i) a capital asset, or 

6 ‘‘(ii) property used in the trade or 

7 business (as defined in section 1231(b)). 

8 ‘‘(B) CERTAIN GAIN NOT QUALIFIED.— 

9 The term ‘qualified capital gain’ shall not in10 clude any gain which would be treated as ordi11 nary income under section 1245 or under sec12 tion 1250 if section 1250 applied to all depre13 ciation rather than the additional depreciation. 

14 ‘‘(C) RELATED PARTY TRANSACTIONS.— 

15 The term ‘qualified capital gain’ shall not in16 clude any gain attributable, directly or indi17 rectly, in whole or in part, to a transaction with 

18 a related person. 

19 ‘‘(6) QUALIFIED OPPORTUNITY FUND.—The 

20 term ‘qualified opportunity fund’ means any invest21 ment vehicle organized as a corporation or a part22 nership for the purpose of investing in qualified op23 portunity zone assets that holds at least 90 percent 

24 of its assets in qualified opportunity zone assets, de25 termined— 


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

2 period of the taxable year of the fund, and 

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

4 the fund. 

5 ‘‘(7) QUALIFIED OPPORTUNITY ZONE BUSI6 NESS.— 

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

8 opportunity zone business’ means a trade or 

9 business— 

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

11 tangible property owned or leased by the 

12 taxpayer is qualified opportunity zone busi13 ness property, 

14 ‘‘(ii) which satisfies the requirements 

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

16 1397C(b), and 

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

18 144(c)(6)(B). 

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

20 subparagraph (A), tangible property that ceases 

21 to be a qualified opportunity zone business 

22 property shall continue to be treated as a quali23 fied opportunity zone business property for the 

24 lesser of— 


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

2 such tangible property ceases to be so 

3 qualified, or 

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

5 property is no longer held by the qualified 

6 opportunity zone business. 

7 ‘‘(8) RELATED PERSONS.—For purposes of this 

8 subsection, persons are related to each other if such 

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

10 determined by substituting ‘20 percent’ for ‘50 per11 cent’ each place it occurs in such sections. 

12 ‘‘(c) BASIS.— 

13 ‘‘(1) IN GENERAL.—The basis of a qualified op14 portunity zone asset, and of an investment in a 

15 qualified opportunity fund, immediately after its ac16 quisition under subsection (a) shall be the amount 

17 determined under subsection (a)(1)(A), reduced by 

18 the amount recognized under subsection (a)(2). 

19 ‘‘(2) ASSET HELD FOR 5 OR MORE YEARS.—Ex20 cept as provided by paragraph (3), the basis of the 

21 qualified opportunity zone asset, and of an invest22 ment in a qualified opportunity fund, determined 

23 under paragraph (1) shall be increased by an 

24 amount equal to— 


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1 ‘‘(A) in the case that such asset is held by 

2 the taxpayer for 5 years, by 10 percent of such 

3 capital gain not recognized under subsection 

4 (a), and 

5 ‘‘(B) in addition to the increase under sub6 paragraph (A), in the case that such asset is 

7 held by the taxpayer for 7 years, by 5 percent 

8 of such capital gain not recognized under sub9 section (a). 

10 ‘‘(3) EXEMPTION FROM CAPITAL GAINS ON

11 GAIN OF LONG-TERM INVESTMENTS.—In the case of 

12 the sale or exchange of a qualified opportunity zone 

13 asset, and of an investment in a qualified oppor14 tunity fund, held for more than 10 years, at the 

15 election of the taxpayer the basis of such asset or in16 vestment in the hands of the taxpayer shall be the 

17 fair market value of such asset or investment (as the 

18 cases may be) at the date of such sale or exchange. 

19 ‘‘(4) DEFERRED RECOGNITION.—In the case of 

20 recognition of capital gain under subsection (a)(2), 

21 the basis of the qualified opportunity zone asset, or 

22 investment in a qualified opportunity fund, shall be 

23 increased by the amount of capital gain so recog24 nized. 

25 ‘‘(d) APPLICABLE RULES.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion and except as otherwise provided in this section, 

3 rules similar to the rules applicable to deferred like 

4 kind exchanges under section 1031 shall apply ex5 cept that reinvestment in opportunity zone property 

6 need not require an intermediary party. 

7 ‘‘(2) REGULATIONS.—The Secretary shall pre8 scribe such regulations as may be necessary or ap9 propriate to carry out the purposes of this section, 

10 including— 

11 ‘‘(A) rules requiring taxpayers to provide 

12 such information as the Secretary determines to 

13 be necessary or appropriate for the identifica14 tion of both the assets sold (including basis and 

15 sale price) and the assets acquired and invest16 ments made, and 

17 ‘‘(B) rules to prevent abuse. 

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

19 amounts recognized under this section shall, if not 

20 properly includible in the gross income of the dece21 dent, be includible in gross income as provided by 

22 section 691. 

23 ‘‘(e) FAILURE OF QUALIFIED OPPORTUNITY FUND

24 TO MAINTAIN INVESTMENT STANDARD.— 


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1 ‘‘(1) IN GENERAL.—If a qualified opportunity 

2 fund fails to meet the 90 percent requirement of 

3 subsection (b)(6), the qualified opportunity fund 

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

5 the requirement in an amount equal to the product 

6 of— 

7 ‘‘(A) the excess of— 

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

9 its aggregate assets, over 

10 ‘‘(ii) the aggregate amount of quali11 fied opportunity zone assets held by the 

12 fund, multiplied by 

13 ‘‘(B) the underpayment rate established 

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

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

16 the case that the qualified opportunity fund is a 

17 partnership, the penalty imposed by paragraph (1) 

18 shall be taken into account proportionately as part 

19 of the distributive share of each partner of the part20 nership. 

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

22 penalty shall be imposed under this subsection with 

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

24 is due to reasonable cause.’’. 


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1 (b) BASIS ADJUSTMENTS.—Section 1016(a) of such 

2 Code is amended by striking ‘‘and’’ at the end of para3 graph (36), by striking the period at the end of paragraph 

4 (37) and inserting ‘‘, and’’, and by inserting after para5 graph (37) the following: 

6 ‘‘(38) to the extent provided in section 1400Z– 

7 2(c).’’. 

8 (c) REPORT TO CONGRESS.—The Secretary of the 

9 Treasury, or the Secretary’s delegate, shall submit a re10 port to Congress on the opportunity zone incentives en11 acted by this section beginning five years after the date 

12 of enactment of this Act and annually thereafter. The re13 port shall include an assessment of opportunity fund in14 vestments nationally and at the State level. To the extent 

15 such information is available, the report shall include the 

16 number of opportunity funds, the amount of assets held 

17 in opportunity funds, the composition of opportunity fund 

18 investments by asset class, the percentage of qualified op19 portunity zone census tracts designated under subchapter 

20 Z of the Internal Revenue Code of 1986 (as added by this 

21 section) that have received opportunity fund investments. 

22 The report shall also include an assessment of the impacts 

23 and outcomes of the investments in those areas on eco24 nomic indicators including job creation, poverty reduction, 


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1 and new business starts, other metrics as determined by 

2 the Secretary. 

3 (d) CLERICAL AMENDMENT.—The table of sub4 chapters for chapter 1 of such Code is amended by adding 

5 at the end the following new items: 

‘‘SUBCHAPTER Z. OPPORTUNITY ZONES’’. 

6 (e) EFFECTIVE DATE.—The amendments made by 

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

8 of this Act. 

Æ 


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