H.R. 3687: To amend the Internal Revenue Code of 1986 to renew and enhance opportunity zones, and for other purposes.

This bill proposes amendments to the Internal Revenue Code of 1986 aimed at renewing and enhancing opportunity zones, which are designated areas intended to spur economic development in low-income communities. Here are the key components of the bill:

Renewal and Enhancement of Opportunity Zones

• Modification of Low-Income Community Definition: The criteria for defining low-income communities will be adjusted, where areas with median family incomes above 125% of the respective state or metropolitan area’s figure will no longer qualify as low-income.
• New Qualified Opportunity Zone Designations: States can nominate additional tracts for designation as qualified opportunity zones, with provisions for designating a certain percentage of these in rural areas. The Secretary of the Treasury will oversee this process, ensuring a minimum portion of rural designations.
• Duration of Designations: Newly designated zones will have an effective period from January 1, 2027, to December 31, 2033.

Investment Incentives Modifications

• Consolidated Basis Increases: For investments in certain opportunity zones, particularly rural ones, the adjusted basis for tax benefits will increase, promoting more robust investments. Specific stipulations will apply to these incentives.
• Ordinary Income Treatment: Taxpayers may elect to apply certain benefits to ordinary income amounts not exceeding $10,000, allowing a flexible tax treatment for smaller income figures.
• Improvement of Existing Structures: Enhanced rules will apply to investments aimed at improving existing structures in rural opportunity zones, linking tax benefits directly with such improvements.

Reporting Requirements

• Filings for Funds: Qualified opportunity funds and qualified rural opportunity funds will be required to file annual returns providing detailed information about their activities, assets, and the impact of their investments.
• Investor Statements: Funds are mandated to furnish statements to investors regarding their returns, including information that complies with detailed regulatory guidelines.

Penalties for Non-Compliance

• Information Reporting Penalties: If an entity fails to file the required information, it will incur daily penalties, which could total up to $10,000 per return annually, with escalated penalties for intentional disregard.

Secretary Reporting

• Data Reports on Opportunity Zones: The Treasury Secretary will be responsible for annual public reports on opportunity funds, detailing the economic impact, employment statistics, and the distribution of investments across designated zones.

Definitions and Additional Provisions

• Definitions: The bill contains specific definitions to ensure clarity around terms regarding opportunity zones and the rules governing both opportunity and rural opportunity funds.
• Effective Date: The rules set forth in the bill will apply to taxable years beginning after the enactment of this legislation.

Relevant Companies

• AMZN (Amazon.com, Inc.): As a major player in logistics and housing development, Amazon could be impacted if it plans to expand in rural opportunity zones.
• PLD (Prologis, Inc.): Prologis specializes in logistics real estate and could benefit from new investment incentives provided in rural opportunity zones.
• SPG (Simon Property Group, Inc.): With a focus on retail and commercial properties, Simon Property Group might explore investments in newly designated opportunity zones.
• RYN (Rayonier Inc.): Rayonier, involved in land and resource management, may consider opportunities in designated rural zones for timberland investments.