Opportunity Zone Reform Act

To amend the Internal Revenue Code of 1986 to reform rules related to qualified opportunity zones. 1. Short title This Act may be cited as the Opportunity Zone Reform Act 2. Modification of tracts qualified to be designated as qualified opportunity zones (a) Disqualification of certain census tracts (1) Census tracts with high median family income Paragraph (1) of section 1400Z–1(c) (1) Low-income communities (A) In general Except as provided in subparagraph (B), the term low-income community (B) Exception (i) In general Such term shall not include any census tract if the median family income for such tract exceeds 120 percent of the national median family income (as determined based the most recent data published by the Bureau of the Census on the date of the enactment of the Opportunity Zone Reform Act (ii) Special rule Clause (i) shall not apply to any census tract if— (I) the poverty rate for such tract is at least 20 percent, and (II) less than 10 percent of the population of such tract is enrolled in an institution of higher education (as defined in section 101 of the Higher Education Act of 1965). . (2) Contiguous census tracts Section 1400Z–1 of such Code is amended by striking subsection (e) and redesignating subsection (f) as subsection (e). (b) Treatment of previously designated tracts Section 1400Z–1 of such Code, as amended by subsection (a)(2), is amended by adding at the end the following: (f) Treatment of certain census tracts (1) In general Except as provided in section 1400Z–2(d)(2)(D), any census tract (other than a census tract in Puerto Rico) which is not a low-income community and which was designated as a qualified opportunity zone before the date of the enactment of the Opportunity Zone Reform Act (2) Replacement zones (A) In general A State may designate a low-income community as a qualified opportunity zone to replace a census tract the status of which as a qualified opportunity zone was terminated by reason of paragraph (1). (B) Special rules For purposes of this subchapter— (i) the determination period with respect to a designation under subparagraph (A) shall be the 90-day period beginning on the date of the enactment of such Act, as extended under subsection (b)(2), and (ii) the period for which any such designation is in effect shall be the period beginning with the date such designation takes effect and ending with the last day of the 10th calendar year beginning on or after the designation date as a qualified opportunity zone for the census tract which it is replacing as such a zone by reason of the termination under clause (i). . (c) Treatment of existing investments Section 1400Z–2(d)(2)(D) of such Code is amended by adding at the end the following new clause: (iv) Special rule for investments in certain census tracts (I) In general For purposes of applying this paragraph, the use of property in a qualified census tract shall be treated as use of property in a qualified opportunity zone if the original use of such property occurred before November 6, 2019, or in the case of property acquired before such date, the property was substantially improved before the close of the 30-month period beginning with the month of the acquisition. (II) Qualified census tract For purposes of this clause, the term qualified census tract Opportunity Zone Reform Act . 3. Maintenance of geographic boundaries of qualified opportunity zones Section 1400Z–1(e) Such designation shall apply to the geographic area as in effect at the time such tract is designated without regard to whether adjustments are made to the boundaries of the census tract so designated. 4. Modification of prohibition on certain types of trades or business as qualified opportunity zone businesses (a) In general Section 1400Z–2(d)(3)(A)(iii) in section 144(c)(6)(B) subsections (a)(8)(B) or (c)(6)(B) of section 144 or section 147(e) (b) Effective date The amendment made by this section shall take effect on November 6, 2019. 5. Other modifications related to qualified opportunity funds (a) Application of qualified opportunity zone business rules to trades or businesses conducted by qualified opportunity zone funds (1) In general Section 1400Z–2(d)(1) (1) In general The term qualified opportunity fund (A) which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property, determined by the average of the percentage of qualified opportunity zone property held in the fund as measured— (i) on the last day of the first 6-month period of the taxable year of the fund, and (ii) on the last day of the taxable year of the fund, and (B) any trade or business of which is a qualified opportunity zone business. . (2) Effective date The amendments made by this subsection shall take effect as if included in section 13823 of Public Law 115–97 (b) Clarification of substantially all (1) In general Section 1400Z–2(d) (A) by striking during substantially all for not less than 90 percent (B) by striking substantially all of the use not less than 90 percent of the use (C) by striking in which substantially all in which not less than 90 percent (2) Effective date The amendments made by this subsection shall take effect as if included in section 13823 of Public Law 115–97 (c) Certain property excluded from qualified opportunity zone business property (1) In general Section 1400Z–2(d)(2)(D) (A) in clause (i), by inserting (other than self-storage property, parking property, stadium property, or disqualified residential rental property) tangible property (B) by adding at the end the following new clauses: (iv) Self-storage property The term self-storage property (v) Parking property The term parking property (vi) Stadium The term stadium property (vii) Disqualified residential rental property The term disqualified residential rental property . (2) Effective date The amendments made by this subsection shall take effect as if included in section 13823 of Public Law 115–97 (d) Treatment of leased property (1) In general Section 1400Z–2(d)(2)(D)(i)(I) or under a lease (other than a lease from a related person) entered into after December 31, 2017, December 31, 2017, (2) Effective date The amendment made by this subsection shall take effect as if included in section 13823 of Public Law 115–97 (e) Correction relating to original use of qualified opportunity zone business property (1) In general Section 1400Z–2(d)(2)(D)(i)(II) in the qualified opportunity zone (2) Effective date The amendment made by this subsection shall take effect as if included in section 13823 of Public Law 115–97 (f) Modification of determination of substantial improvement of qualified opportunity zone business property (1) In general Section 1400Z–2(d)(2)(D)(ii) (including land) adjusted basis of such property (2) Effective date The amendment made by this subsection shall take effect as if included in section 13823 of Public Law 115–97 6. Public list of qualified opportunity funds The Secretary of the Treasury (or the Secretary's delegate) shall maintain and make publicly available on the internet and at the offices of the Internal Revenue Service— (1) a list of investment vehicles that are certified as qualified opportunity funds (as defined in section 1400Z–2(d)(1) (2) the name, address, and the uniform resource locator (URL) for the website for such fund. 7. GAO Report (a) In general Not later than each applicable date, the Comptroller General of the United States shall submit to Congress a report on the effectiveness of the provisions of subchapter Z of chapter 1 (b) Matters included The reports submitted under subsection (a) shall include an analysis of— (1) the distribution of investments of qualified opportunity funds among qualified opportunity zones, (2) the distribution of such investments across different industries or investment purposes, (3) the impact of the designation of an area as a qualified opportunity zone on— (A) economic indicators, including employment, new business start-ups, and poverty reduction, (B) housing costs, and (C) income distribution among residents of such zones, (4) the economic benefits provided by such designations compared to economic costs, and (5) to the extent practicable, the impact of the provisions of such subchapter Z on low-income communities that have not been designated as qualified opportunity zones. (c) Definitions (1) Applicable date The term applicable date (A) the date that is 5 years after the date of the enactment of this Act, and (B) the date that is 10 years after the date of the enactment of this Act. (2) Other terms Any term used in this section which is also used in subchapter Z of chapter 1

Summary: Opportunity Zone Reform Act This bill modifies requirements relating to qualified opportunity zones. A "qualified opportunity zone" is an area in which investment is encouraged to promote economic development and job creation in distressed communities by providing tax benefits to investors. The bill revises requirements for the designation of certain census tracts as qualified opportunity zones based on median family income. It also excludes certain property from the term "qualified opportunity zone business property," including self storage property, parking property, stadiums, and certain residential rental property. The bill requires the Internal Revenue Service to provide a publicly available list of investment vehicles that are certified as qualified opportunity funds. The Government Accountability Office must report to Congress on the effectiveness of the Opportunity Zone program in the fifth and tenth year after the enactment of this bill.