II 

115TH CONGRESS 

1ST SESSION S. 293 

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

of inclusion in gross income for capital gains reinvested in opportunity zones. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 2, 2017 

Mr. SCOTT (for himself, Mr. BOOKER, Mr. BLUNT, Mr. BENNET, Mr. GRAHAM, Mr. COONS, Mrs. CAPITO, Mrs. GILLIBRAND, Mr. PETERS, Mr. 

GARDNER, Mr. YOUNG, and Mr. WARNER) 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 the deferral of inclusion in gross income for capital 

gains reinvested in opportunity 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’’. 

6 SEC. 2. OPPORTUNITY ZONES. 

7 (a) IN GENERAL.—Chapter 1 of the Internal Rev8 enue Code of 1986 is amended by adding at the end the 

9 following: 


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1 ‘‘Subchapter Z—Opportunity Zones 

‘‘Sec. 1400Z–1. Designation. 

‘‘Sec. 1400Z–2. Deferral for capital gains invested in opportunity zones. 

2 ‘‘SEC. 1400Z–1. DESIGNATION. 

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

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

5 opportunity zone’ means a population census tract that 

6 is a low-income community that is designated as a quali7 fied opportunity zone. 

8 ‘‘(b) DESIGNATION.— 

9 ‘‘(1) GOVERNOR.— 

10 ‘‘(A) IN GENERAL.—For purposes of sub11 section (a), a population census tract that is a 

12 low-income community is designated as a quali13 fied opportunity zone if— 

14 ‘‘(i) not later than the end of the de15 termination period, the governor of the 

16 State in which the tract is located— 

17 ‘‘(I) nominates the tract for des18 ignation as a qualified opportunity 

19 zone, and 

20 ‘‘(II) notifies the Secretary in 

21 writing of such nomination, and 

22 ‘‘(ii) the Secretary certifies such nomi23 nation and designates such tract as a 


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1 qualified opportunity zone before the end 

2 of the consideration period. 

3 ‘‘(B) EXTENSION OF PERIODS.—A gov4 ernor may request that the Secretary extend ei5 ther the determination or consideration period, 

6 or both (determined without regard to this sub7 paragraph), for an additional 30 days. 

8 ‘‘(C) DEEMED DESIGNATION IF SEC9 RETARY FAILS TO ACT.—Unless the tracts are 

10 ineligible for designation, if the Secretary de11 clines in writing to make such certification and 

12 designation or fails to act before the end of the 

13 consideration period, such nomination shall be 

14 deemed to be certified and designated, effective 

15 on the day after the last day of the consider16 ation period. 

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

18 the nominations and notifications by the end of the 

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

20 the Secretary shall designate and certify population 

21 census tracts that are low-income communities as 

22 qualified opportunity zones, as permitted by sub23 section (e). 

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

25 subsection— 


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

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

3 when used in section 45D(e). 

4 ‘‘(2) DEFINITION OF PERIODS.— 

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

6 ‘consideration period’ means the 30-day period 

7 beginning on the date on which the Secretary 

8 receives notice under subsection 

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

10 (b)(1)(B). 

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

12 ‘determination period’ means the 90-day period 

13 beginning on the date of the enactment of the 

14 Investing in Opportunity Act, as extended 

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

16 ‘‘(d) GUIDANCE FOR OPPORTUNITY ZONE NOMINA17 TIONS.—When considering the nomination of qualified op18 portunity zones, governors should strive for the creation 

19 of qualified opportunity zones that are geographically con20 centrated and contiguous clusters of population census 

21 tracts and should give particular consideration to areas 

22 that— 

23 ‘‘(1) are currently the focus of mutually rein24 forcing State, local, or private economic development 


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1 initiatives to attract investment and foster startup 

2 activity, 

3 ‘‘(2) have demonstrated success in geographi4 cally targeted development programs, such as prom5 ise zones, new market tax credit, empowerment 

6 zones, and renewal communities, and 

7 ‘‘(3) have recently experienced significant lay8 offs due to business closures or relocations. 

9 ‘‘(e) NUMBER OF DESIGNATIONS.— 

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

11 paragraph (2), the number of population census 

12 tracts in a State that may be designated as qualified 

13 opportunity zones under this section may not exceed 

14 25 percent of the number of low-income communities 

15 in the State. 

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

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

18 of 25 of such tracts may be designated as qualified 

19 opportunity zones. 

20 ‘‘(f) DESIGNATION OF TRACTS CONTIGUOUS WITH

21 LOW-INCOME COMMUNITIES.— 

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

23 that is not a low-income community may be des24 ignated as a qualified opportunity zone under this 

25 section if— 


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1 ‘‘(A) the tract is contiguous with the low2 income community that is designated as a 

3 qualified opportunity zone, and 

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

5 does not exceed 125 percent of the median fam6 ily income of the low-income community with 

7 which the tract is contiguous. 

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

9 the population census tracts designated in a State as 

10 a qualified opportunity zone may be designated 

11 under paragraph (1). 

12 ‘‘(g) PERIOD FOR WHICH DESIGNATION IS IN EF13 FECT.—A designation as a qualified opportunity zone 

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

15 of the designation and ending at the close of the 10th cal16 endar year beginning on or after such date of designation. 

17 ‘‘SEC. 1400Z–2. DEFERRAL FOR CAPITAL GAINS INVESTED 

18 IN OPPORTUNITY ZONES. 

19 ‘‘(a) SPECIAL RULES WHEN GAIN FROM SALE OF

20 PROPERTY INVESTED IN OPPORTUNITY ZONE PROP21 ERTY.— 

22 ‘‘(1) EXCLUSION OF GAIN INVESTED IN OPPOR23 TUNITY ZONE PROPERTY.—In the case of gain from 

24 the sale to, or exchange with, an unrelated person of 


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1 any property held by the taxpayer, at the election of 

2 the taxpayer— 

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

4 shall not include so much of such gain as does 

5 not exceed the aggregate cost of all qualified 

6 opportunity zone property acquired by the tax7 payer during the 180-day period beginning on 

8 the date of such sale or exchange, and 

9 ‘‘(B) the amount of gain excluded by sub10 paragraph (A) shall be included in gross income 

11 as provided by paragraph (2). 

12 ‘‘(2) DEFERRAL OF GAIN INVESTED IN OPPOR13 TUNITY ZONE PROPERTY.— 

14 ‘‘(A) YEAR OF INCLUSION.—Except as 

15 provided by subparagraph (C), gain to which 

16 paragraph (1)(B) applies shall be included in 

17 income in the taxable year in which the quali18 fied opportunity zone property related to such 

19 gain is sold or exchanged in the amount deter20 mined under subparagraph (B). 

21 ‘‘(B) AMOUNT INCLUDIBLE.—The amount 

22 of gain determined under this clause shall be— 

23 ‘‘(i) 100 percent of such gain in the 

24 case of the sale or exchange of the quali25 fied opportunity zone property with respect 


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1 to which gain is deferred under paragraph 

2 (1) that is held for less than 5 years, 

3 ‘‘(ii) 90 percent of such gain in the 

4 case of the sale or exchange of the quali5 fied opportunity zone property with respect 

6 to which gain is deferred under paragraph 

7 (1) that is held for at least 5 years but less 

8 than 7 years, and 

9 ‘‘(iii) 85 percent of such gain in the 

10 case of the sale or exchange of the quali11 fied opportunity zone property with respect 

12 to which gain is deferred under paragraph 

13 (1) that is held for at least 7 years. 

14 ‘‘(C) PROPERTY HELD AFTER 2026 TREAT15 ED AS SOLD.—For purposes of subparagraph 

16 (A), any qualified opportunity zone property 

17 that has not been sold or exchanged on or be18 fore December 31, 2026, shall be treated as 

19 sold on December 31, 2026. 

20 ‘‘(3) EXCLUSION OF GAIN ON QUALIFIED OP21 PORTUNITY ZONE PROPERTY HELD FOR AT LEAST 10

22 YEARS.—Except as provided in paragraph (2), in the 

23 case of the sale or exchange of qualified opportunity 

24 zone property, or an investment in a qualified oppor25 tunity fund, held for at least 10 years, gross income 


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1 for the taxable year shall not include any gain from 

2 the sale or exchange of such property or investment. 

3 ‘‘(4) ONE ELECTION PER PROPERTY.—No elec4 tion may be made under paragraph (1) with respect 

5 to a sale or exchange if an election previously made 

6 with respect to such sale or exchange is in effect. 

7 ‘‘(b) BASIS RULES RELATING TO QUALIFIED OPPOR8 TUNITY ZONE PROPERTY.— 

9 ‘‘(1) REDUCED BY GAIN DEFERRED UNDER

10 SUBSECTION (a)(1).—The basis of a qualified oppor11 tunity zone property immediately after its acquisi12 tion under subsection (a) shall be reduced by the 

13 amount of gain deferred by reason of subsection 

14 (a)(1)(A) with respect to such property. 

15 ‘‘(2) INCREASE FOR GAIN RECOGNIZED UNDER

16 SUBSECTION (a)(2).—The basis of qualified oppor17 tunity zone property shall be increased by the 

18 amount of gain recognized by reason of subsection 

19 (a)(2) with respect to such property. 

20 ‘‘(3) SUBSEQUENT INCREASE IN BASIS FOR

21 PROPERTY HELD FOR AT LEAST 5 YEARS BUT LESS

22 THAN 10 YEARS.—In the case of qualified oppor23 tunity zone property held for at least 5 years but 

24 less than 10 years— 


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1 ‘‘(A) PROPERTY HELD FOR 5 YEARS.—For 

2 qualified opportunity zone property held for at 

3 least 5 years, the basis of such property shall 

4 be increased by an amount equal to 10 percent 

5 of the amount of gain deferred by reason of 

6 subsection (a)(1)(A) with respect to such prop7 erty. 

8 ‘‘(B) PROPERTY HELD FOR 7 YEARS.—For 

9 qualified opportunity zone property held for at 

10 least 7 years, the basis of such property shall 

11 be increased by an amount equal to 5 percent 

12 of the amount of gain deferred by reason of 

13 subsection (a)(1)(A) with respect to such prop14 erty. 

15 ‘‘(c) QUALIFIED OPPORTUNITY ZONE PROPERTY.— 

16 For purposes of this section: 

17 ‘‘(1) IN GENERAL.—The term ‘qualified oppor18 tunity zone property’ means property which is— 

19 ‘‘(A) qualified opportunity zone stock, 

20 ‘‘(B) qualified opportunity zone partner21 ship interest, 

22 ‘‘(C) qualified opportunity zone business 

23 property, or 

24 ‘‘(D) an interest in a qualified investment 

25 fund. 


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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, 2017, 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, 2017, 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 2017, 


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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). 


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1 ‘‘(5) QUALIFIED OPPORTUNITY FUND.—The 

2 term ‘qualified opportunity fund’ means any invest3 ment vehicle organized as a corporation or a part4 nership for the purpose of investing in qualified op5 portunity zone property (other than another quali6 fied opportunity fund) that holds at least 90 percent 

7 of its assets in qualified opportunity zone property, 

8 determined— 

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

10 period of the taxable year of the fund, and 

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

12 the fund. 

13 ‘‘(6) QUALIFIED OPPORTUNITY ZONE BUSI14 NESS.— 

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

16 opportunity zone business’ means a trade or 

17 business— 

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

19 tangible property owned or leased by the 

20 taxpayer is qualified opportunity zone busi21 ness property, 

22 ‘‘(ii) which satisfies the requirements 

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

24 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 opportunity zone business 

6 property shall continue to be treated as a quali7 fied opportunity zone business property for the 

8 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 opportunity zone business. 

15 ‘‘(d) APPLICABLE RULES.— 

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion and except as otherwise provided in this section, 

18 rules similar to the rules applicable to deferred like 

19 kind exchanges under section 1031 shall apply ex20 cept that reinvestment in opportunity zone property 

21 need not require an intermediary party. 

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

23 subsection, persons are related to each other if such 

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


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1 determined by substituting ‘20 percent’ for ‘50 per2 cent’ each place it occurs in such sections. 

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

4 amounts recognized under this section shall, if not 

5 properly includible in the gross income of the dece6 dent, be includible in gross income as provided by 

7 section 691. 

8 ‘‘(4) REGULATIONS.—The Secretary shall pre9 scribe such regulations as may be necessary or ap10 propriate to carry out the purposes of this section, 

11 including— 

12 ‘‘(A) rules providing for proportionate in13 clusion in income and increases in basis for 

14 purposes of subsections (a) and (b) in cases in 

15 which a sale or exchange of any qualified oppor16 tunity zone property with respect to which gain 

17 is deferred under subsection (a)(1)(A) is less 

18 than all of such property, 

19 ‘‘(B) rules requiring taxpayers to provide 

20 such information as the Secretary determines to 

21 be necessary or appropriate for the identifica22 tion of both the assets sold (including basis and 

23 sale price) and the assets acquired and invest24 ments made, and 

25 ‘‘(C) rules to prevent abuse. 


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1 ‘‘(e) FAILURE OF QUALIFIED OPPORTUNITY FUND

2 TO MAINTAIN INVESTMENT STANDARD.— 

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

4 fund fails to meet the 90-percent requirement of 

5 subsection (c)(5), the qualified opportunity fund 

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

7 the requirement in an amount equal to the product 

8 of— 

9 ‘‘(A) the excess of— 

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

11 its aggregate assets, over 

12 ‘‘(ii) the aggregate amount of quali13 fied opportunity zone property held by the 

14 fund, multiplied by 

15 ‘‘(B) the underpayment rate established 

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

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

18 the case that the qualified opportunity fund is a 

19 partnership, the penalty imposed by paragraph (1) 

20 shall be taken into account proportionately as part 

21 of the distributive share of each partner of the part22 nership. 

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

24 penalty shall be imposed under this subsection with 


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

2 is due to reasonable cause.’’. 

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

4 Code is amended by striking ‘‘and’’ at the end of para5 graph (36), by striking the period at the end of paragraph 

6 (37) and inserting ‘‘, and’’, and by inserting after para7 graph (37) the following: 

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

9 2(b).’’. 

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

11 Treasury, or the Secretary’s delegate, shall submit a re12 port to Congress on the opportunity zone incentives en13 acted by this section beginning 5 years after the date of 

14 enactment of this Act and annually thereafter. The report 

15 shall include an assessment of investments held by quali16 fied opportunity funds nationally and at the State level. 

17 To the extent such information is available, the report 

18 shall include the number of qualified opportunity funds, 

19 the amount of assets held in qualified opportunity funds, 

20 the composition of qualified opportunity fund investments 

21 by asset class, the percentage of qualified opportunity zone 

22 census tracts designated under subchapter Z of the Inter23 nal Revenue Code of 1986 (as added by this section) that 

24 have received qualified opportunity fund investments. The 

25 report shall also include an assessment of the impacts and 


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1 outcomes of the investments in those areas on economic 

2 indicators including job creation, poverty reduction, and 

3 new business starts, and other metrics as determined by 

4 the Secretary. 

5 (d) CLERICAL AMENDMENT.—The table of sub6 chapters for chapter 1 of such Code is amended by adding 

7 at the end the following new item: 

‘‘SUBCHAPTER Z. OPPORTUNITY ZONES’’. 

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

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

10 of this Act. 

Æ 


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