Title: Opportunity Zone Reform Act
Policy area: Taxation

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.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5042 Introduced in House (IH)]

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116th CONGRESS
  1st Session
                                H. R. 5042

 To amend the Internal Revenue Code of 1986 to reform rules related to 
                      qualified opportunity zones.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 12, 2019

   Mr. Clyburn (for himself, Ms. Adams, and Mr. Clay) 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 reform rules related to 
                      qualified opportunity zones.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Opportunity Zone Reform Act''.

SEC. 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) of the Internal Revenue 
        Code of 1986 is amended to read as follows:
            ``(1) Low-income communities.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `low-income community' has 
                the same meaning as when used in section 45D(e).
                    ``(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 shall not be 
        treated as a qualified opportunity zone on or after such date 
        of enactment.
            ``(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' means any 
                                census tract 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.''.

SEC. 3. MAINTENANCE OF GEOGRAPHIC BOUNDARIES OF QUALIFIED OPPORTUNITY 
              ZONES.

    Section 1400Z-1(e) of the Internal Revenue Code of 1986, as 
redesignated by section 2(a)(2), is amended by adding at the end the 
following new sentence: ``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.''.

SEC. 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) of the Internal 
Revenue Code of 1986 is amended by striking ``in section 144(c)(6)(B)'' 
and inserting ``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.

SEC. 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) of the Internal 
        Revenue Code of 1986 is amended to read as follows:
            ``(1) In general.--The term `qualified opportunity fund' 
        means any investment vehicle--
                    ``(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) of the Internal Revenue 
        Code of 1986 is amended--
                    (A) by striking ``during substantially all'' each 
                place it appears in paragraphs (2)(B)(i)(III), 
                (2)(C)(iii), and (2)(D)(i)(III) and inserting ``for not 
                less than 90 percent'',
                    (B) by striking ``substantially all of the use'' in 
                paragraph (2)(D)(i)(III) and inserting ``not less than 
                90 percent of the use'', and
                    (C) by striking ``in which substantially all'' in 
                paragraph (3)(A)(i) and inserting ``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) of the Internal 
        Revenue Code of 1986 is amended--
                    (A) in clause (i), by inserting ``(other than self-
                storage property, parking property, stadium property, 
                or disqualified residential rental property)'' after 
                ``tangible property'', and
                    (B) by adding at the end the following new clauses:
                            ``(iv) Self-storage property.--The term 
                        `self-storage property' means property designed 
                        and used for the purpose of renting or leasing 
                        individual storage space to occupants who are 
                        to have access to such space for the purpose of 
                        storing and removing personal property.
                            ``(v) Parking property.--The term `parking 
                        property' means any property 90 percent or more 
                        of the square footage of which is used for 
                        parking or for the ingress or egress of 
                        vehicles.
                            ``(vi) Stadium.--The term `stadium 
                        property' means any facility (or appurtenant 
                        real property) which, during at least 5 days 
                        during any calendar year, is used as a stadium 
                        or arena for professional sports exhibitions, 
                        games, or training.
                            ``(vii) Disqualified residential rental 
                        property.--The term `disqualified residential 
                        rental property' means any residential rental 
                        property unless 50 percent or more of the 
                        residential units of such property are both 
                        rent-restricted (within the meaning of section 
                        42(g)(2)) and occupied by individuals whose 
                        income is 50 percent or less of area median 
                        income.''.
            (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) of the 
        Internal Revenue Code of 1986 is amended by inserting ``or 
        under a lease (other than a lease from a related person) 
        entered into after December 31, 2017,'' after ``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) of the 
        Internal Revenue Code of 1986 is amended by striking ``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) of the 
        Internal Revenue Code of 1986 is amended by inserting 
        ``(including land)'' after ``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.

SEC. 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) of the Internal Revenue Code of 1986) pursuant to the 
        rules established under section 1400Z-2(e)(4)(A) of such Code, 
        and
            (2) the name, address, and the uniform resource locator 
        (URL) for the website for such fund.

SEC. 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 of the Internal Revenue Code of 1986 in achieving the 
policies of such provisions.
    (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'' means--
                    (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 of the Internal Revenue 
        Code of 1986 shall have the meaning given such term under such 
        subchapter.
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