H.R. 7820: To amend the Internal Revenue Code of 1986 to modify the rules for investments in qualified opportunity funds, and for other purposes.

This bill proposes modifications to the rules governing investments in qualified opportunity funds under the Internal Revenue Code of 1986. Below are the main components of the bill:

Modification of Rules for Investments in Qualified Opportunity Funds

1. Extension of Designation Period of Qualified Opportunity Zones

The bill extends the period during which areas can be designated as qualified opportunity zones from the current limit of 10 years to 20 years. This means that once an area is designated, it can retain that status for a longer period, thus allowing for sustained investment opportunities in those areas.

2. Extension of Election Period

The election period during which investors can take advantage of tax benefits associated with qualified opportunity funds is also extended. The deadline for such elections is changed from December 31, 2026, to December 31, 2036. This allows investors more time to make investments and claim associated tax incentives.

3. Year of Inclusion

The bill specifies when gains from investments made in these funds will be included in taxable income. For investments made before the bill is enacted, gains are included on December 31, 2026. For investments made after the bill's enactment but before January 1, 2037, gains are included on December 31, 2036.

4. Rules Applicable to Residential Rental Projects

This section introduces specific rules for investments in residential rental projects within qualified opportunity zones:

• Increases in Basis: The bill provides conditions under which the investment basis can be increased if at least 50% of the occupied residential units in the project are rented to individuals whose income is at or below the area median income.
• Amended Percentage Requirements: New thresholds for occupied residential units are set, requiring that the amount of qualified units in relation to total units increases from 10% to 15% for certain benefits, and from 5% to 7% for other benefits.

5. Treatment of Residential Rental Projects as Qualified Opportunity Zone Property

The bill outlines criteria for residential rental projects to be classified as qualified opportunity zone property:

• The project must meet the definition of qualified opportunity zone business property.
• At least 30% of the occupied units should be rented to individuals with an income at or below the area median income during most of the holding period of the investment.
• Rent increases cannot exceed 3% annually for any unit.
• Owners must provide at least a 60-day notice before any rent increase.

6. Effective Dates

The amendments proposed by the bill are generally set to take effect on the date of enactment. However, the extension of the designation period applies to existing designations at the time the bill is enacted.

Relevant Companies

• CBRE Group, Inc. (CBRE) - As a company involved in real estate services, including investment management, the bill's changes could affect their operations related to qualified opportunity zones.
• American Homes 4 Rent (AMH) - This company could also be impacted as it is engaged in acquiring, developing, and managing residential homes, potentially benefiting from revised investment incentives.