A new batch of tax regulations from the Treasury Department will establish the most comprehensive guidelines yet for what sorts of investments qualify for tax benefits associated with opportunity zones, which were created by the 2017 tax law, and how investors must proceed in order to take advantage of them, The New York Times reported. Civic leaders are hoping the rules will be broad enough to improve the odds of attracting new businesses that offer well-paying jobs to residents. Investors are also clamoring for guidelines that could determine the types of projects they can back. Among the money dependent on the Trump administration’s rules is $22 million in investment guarantees, to be announced Monday, to support two socially conscious investment funds that hope to pour $800 million into manufacturing, clean energy and other business development in Opportunity Zones. The zones are a creation of President Trump’s signature tax law that use tax advantages to lure capital to economically lagging cities, suburbs and rural areas. So far, they have stirred growing investor interest and criticism from some tax experts who worry they will serve mostly as a handout to the rich. Most of the projects spurred so far by the zone designations are real estate, like condominium developments, or hospitality. Whether the zones can ultimately spur other types of investment will depend on how the rules are structured. The tax break works by allowing investors to roll capital gains from other investments into the funds. Taxes on those original gains are deferred and, if the investment is held for several years, can be sharply reduced. Adding to the attraction is the potential for investors who hold their money in the opportunity fund for a full decade to be exempt from any capital gains taxes on that investment.
