Renewal and enhancement of opportunity zones

(a)

Modification of low-Income community definition

Section 1400Z–1(c)(1) of the Internal Revenue Code of 1986 is amended— (1) by striking communities.—The term and inserting the following:

communities.— (A)

In general

The term

, and

(2) by adding at the end the following:

(B)

Modifications

For purposes of subparagraph (A), section 45D(e)(1) shall be applied in subparagraph (B) thereof, by substituting 70 percent for 80 percent each place it appears. (C)

Certain census tracts disallowed

The term low-income community shall not include any population census tract if— (i) in the case of a tract not located within a metropolitan area, the median family income for such tract is at least 125 percent of statewide median family income, or (ii) in the case of a tract located within a metropolitan area, the median family income for such tract is at least 125 percent of the metropolitan area median family income.

(b)

New round of qualified opportunity zone designations

(1)

In general

Section 1400Z–1 of such Code is amended by adding at the end the following new subsection:

(g)

New round of qualified opportunity zone designations

(1)

In general

In addition to designations under subsection (b), and under rules similar to the rules of such subsection, the Secretary shall designate tracts nominated by the chief executive officers of States for purposes of this section. (2)

Number of designations; proportion of rural areas designated

(A)

In general

Of the low-income communities within a State, the Secretary may designate under this subsection not more than 25 percent as qualified opportunity zones, of which at least the lesser of the following shall be qualified opportunity zones which are comprised entirely of a rural area: (i)The applicable percentage of the total number of qualified opportunity zone designations which may be made within the State under this subsection. (ii)All low-income communities within the State which are comprised entirely of a rural area. (B)

Applicable percentage

For purposes of this paragraph, the applicable percentage shall be, for any calendar year during which a designation is made, the greater of— (i)33 percent, or (ii)the percentage of the United States population living within a rural area for the preceding calendar year. (3)

Rural area

Whether a low-income community is comprised entirely of a rural area shall be determined by the Secretary in consultation with the Secretary of Agriculture. For purposes of this subsection, the term rural area has the meaning given such term by section 343(a)(13)(A) of the Consolidated Farm and Rural Development Act. (4)

Period for which designation is in effect

A designation as a qualified opportunity zone under this subsection shall remain in effect for the period beginning on January 1, 2027, and ending on December 31, 2033. (5)

Contiguous tracts not eligible

Subsection (e) shall not apply to designations made under this subsection.

(2)

Election with respect to new round of zones

Section 1400Z–2(a)(2)(B) of such Code is amended by striking December 31, 2026 and inserting December 31, 2033. (3)

Year of inclusion

Section 1400Z–2(b)(1)(B) of such Code is amended to read as follows:

(B) (i)December 31, 2026, in the case of an amount invested before January 1, 2027, and (ii)December 31, 2033, in the case of an amount invested after December 31, 2026, and before January 1, 2034.

(4)

Winding down initial zone designations

Section 1400Z–1(f) of such Code is amended— (A)by striking and ending and all that follows and inserting the following: and ending on December 31, 2026., and (B)by striking A designation and inserting Except as provided in subsection (g)(4), a designation. (c)

Modification of opportunity zone investment incentives

(1)

Consolidated basis increases; rural zone basis increase

Section 1400Z–2(b)(2)(B) of such Code is amended by adding at the end the following new clauses:

(v)

Consolidated basis increase for investments after 2026

In the case of investments made after December 31, 2026— (I)clauses (iii) and (iv) shall not apply, and (II)for any such investment held by the taxpayer for at least 5 years, the basis of such adjustment shall be increased by an amount equal to 10 percent of the amount of gain deferred by reason of subsection (a)(1)(A). (vi)

Special rule for rural opportunity funds

Clause (v) shall be applied by substituting 30 percent for 10 percent in the case of an investment in a qualified rural opportunity fund. (vii)

Qualified rural opportunity fund

For purposes of clause (vi), a qualified rural opportunity fund means a qualified opportunity fund that holds at least 90 percent of its assets in qualified opportunity zone property which— (I)is qualified opportunity zone business property substantially all of the use of which, during substantially all of the fund’s holding period for such property, was in a qualified opportunity zone comprised entirely of a rural area, or (II)is qualified opportunity zone stock, or a qualified opportunity zone partnership interest, in a qualified opportunity zone business in which substantially all of the tangible property owned or leased is qualified opportunity zone business property described in subsection (d)(3)(A)(i) and substantially all the use of which is in a qualified opportunity zone comprised entirely of a rural area.

For purposes of the preceding sentence, property held in the fund shall be measured under rules similar to the rules of subsection (d)(1).

(2)

Limited treatment of ordinary income

Section 1400Z–2(a) of such Code is amended by adding at the end the following new paragraph:

(3)

Special rule for ordinary income

In the case of any ordinary income of the taxpayer for the taxable year— (A)the taxpayer may elect the application of paragraph (1) with respect to so much of ordinary income as does not exceed $10,000 (reduced by the amount of any income with respect to which an election pursuant to this paragraph has previously been made), and (B)subsection (b)(2)(B) shall not apply to the investment with respect to such election.

(3)

Special rule for improvement of existing structures in rural areas, including for data centers

Section 1400Z–2(d)(2)(D)(ii) of such Code is amended by inserting (50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area) after the adjusted basis of such property. (d)

Information reporting on qualified opportunity funds and qualified rural opportunity funds

(1)

Filing requirements for funds and investors

Subpart A of part III of subchapter A of chapter 61 of such Code is amended by inserting after section 6039J the following new sections:

6039K.

Returns with respect to qualified opportunity funds and qualified rural opportunity funds

(a)

In general

Every qualified opportunity fund shall file an annual return (at such time and in such manner as the Secretary may prescribe) containing the information described in subsection (b). (b)

Information from qualified opportunity funds

The information described in this subsection is— (1)the name, address, and taxpayer identification number of the qualified opportunity fund, (2)whether the qualified opportunity fund is organized as a corporation or a partnership, (3)the value of the total assets held by the qualified opportunity fund as of each date described in section 1400Z–2(d)(1), (4)the value of all qualified opportunity zone property held by the qualified opportunity fund on each such date, (5)with respect to each investment held by the qualified opportunity fund in qualified opportunity zone stock or a qualified opportunity zone partnership interest— (A)the name, address, and taxpayer identification number of the corporation in which such stock is held or the partnership in which such interest is held, as the case may be, (B)each North American Industry Classification System (NAICS) code that applies to the trades or businesses conducted by such corporation or partnership, (C)the population census tracts in which the qualified opportunity zone business property of such corporation or partnership is located, (D)the amount of the investment in such stock or partnership interest as of each date described in section 1400Z–2(d)(1), (E)the value of tangible property held by such corporation or partnership on each such date which is owned by such corporation or partnership, (F)the value of tangible property held by such corporation or partnership on each such date which is leased by such corporation or partnership, (G)the approximate number of residential units (if any) for any real property held by such corporation or partnership, and (H)the approximate average monthly number of full-time equivalent employees of such corporation or partnership for the year (within numerical ranges identified by the Secretary) or such other indication of the employment impact of such corporation or partnership as determined appropriate by the Secretary, (6)with respect to the items of qualified opportunity zone business property held by the qualified opportunity fund— (A)the North American Industry Classification System (NAICS) code that applies to the trades or businesses in which such property is held, (B)the population census tract in which the property is located, (C)whether the property is owned or leased, (D)the aggregate value of the items of qualified opportunity zone property held by the qualified opportunity fund as of each date described in section 1400Z–2(d)(1), and (E)in the case of real property, number of residential units (if any), (7)the approximate average monthly number of full-time equivalent employees for the year of the trades or businesses of the qualified opportunity fund in which qualified opportunity zone business property is held (within numerical ranges identified by the Secretary) or such other indication of the employment impact of such trades or businesses as determined appropriate by the Secretary, (8)with respect to each person who disposed of an investment in the qualified opportunity fund during the year— (A)the name and taxpayer identification number of such person, (B)the date or dates on which the investment disposed was acquired, and (C)the date or dates on which any such investment was disposed and the amount of the investment disposed, and (9)such other information as the Secretary may require. (c)

Statement required To be furnished to investors

Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return by reason of subsection (b)(8) a written statement showing— (1) the name, address and phone number of the information contact of the person required to make such return, and (2) the information required to be shown on such return by reason of subsection (b)(8) with respect to the person whose name is required to be so set forth. (d)

Definitions

For purposes of this section— (1)

In general

Any term used in this section which is also used in subchapter Z of chapter 1 shall have the meaning given such term under such subchapter. (2)

Full-time equivalent employees

The term full-time equivalent employees means, with respect to any month, the sum of— (A)the number of full-time employees (as defined in section 4980H(c)(4)) for the month, plus (B)the number of employees determined (under rules similar to the rules of section 4980H(c)(2)(E)) by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120. (e)

Application to qualified rural opportunity funds

Every qualified rural opportunity fund (as defined in section 1400Z–2(b)(2)(B)(vii)) shall file the annual return required under subsection (a), and the statements required under subsection (c), applied— (1)by substituting qualified rural opportunity for qualified opportunity each place it appears, (2)by substituting section 1400Z–2(b)(2)(B)(vii) for section 1400Z–2(d)(1) each place it appears, and (3)by treating any reference (after the application of paragraph (1)) to qualified rural opportunity zone stock, a qualified rural opportunity zone partnership interest, a qualified rural opportunity zone business, or qualified opportunity zone business property as stock, an interest, a business, or property, respectively, described in (I) or (II), as the case may be, of section 1400Z–2(b)(2)(B)(vii).

6039L.

Information required from qualified opportunity zone businesses and qualified rural opportunity zone businesses

(a)

In general

Every applicable qualified opportunity zone business shall furnish to the qualified opportunity fund described in subsection (b) a written statement in such manner and setting forth such information as the Secretary may by regulations prescribe for purposes of enabling such qualified opportunity fund to meet the requirements of section 6039K(b)(5). (b)

Applicable qualified opportunity zone business

For purposes of subsection (a), the term applicable qualified opportunity zone business means any qualified opportunity zone business— (1)which is a trade or business of a qualified opportunity fund, (2)in which a qualified opportunity fund holds qualified opportunity zone stock, or (3)in which a qualified opportunity fund holds a qualified opportunity zone partnership interest. (c)

Other terms

Any term used in this section which is also used in subchapter Z of chapter 1 shall have the meaning given such term under such subchapter. (d)

Application to qualified rural opportunity businesses

Every applicable qualified rural opportunity zone business (as defined in subsection (b) determined after application of the substitutions described in this sentence) shall furnish the written statement required under subsection (a), applied— (1)by substituting qualified rural opportunity for qualified opportunity each place it appears, and (2)by treating any reference (after the application of paragraph (1)) to qualified rural opportunity zone stock, a qualified rural opportunity zone partnership interest, or a qualified rural opportunity zone business as stock, an interest, or a business, respectively, described in (I) or (II), as the case may be, of section 1400Z–2(b)(2)(B)(vii).

(2)

Penalties

(A)

In general

Part II of subchapter B of chapter 68 of such Code is amended by inserting after section 6725 the following new section:

6726.

Failure to comply with information reporting requirements relating to qualified opportunity funds and qualified rural opportunity funds

(a)

In general

In the case of any person required to file a return under section 6039K fails to file a complete and correct return under such section in the time and in the manner prescribed therefor, such person shall pay a penalty of $500 for each day during which such failure continues. (b)

Limitation

(1)

In general

The maximum penalty under this section on failures with respect to any 1 return shall not exceed $10,000. (2)

Large qualified opportunity funds

In the case of any failure described in subsection (a) with respect to a fund the gross assets of which (determined on the last day of the taxable year) are in excess of $10,000,000, paragraph (1) shall be applied by substituting $50,000 for $10,000. (c)

Penalty in cases of intentional disregard

If a failure described in subsection (a) is due to intentional disregard, then— (1)subsection (a) shall be applied by substituting $2,500 for $500, (2)subsection (b)(1) shall be applied by substituting $50,000 for $10,000, and (3)subsection (b)(2) shall be applied by substituting $250,000 for $50,000. (d)

Inflation adjustment

(1)

In general

In the case of any failure relating to a return required to be filed in a calendar year beginning after 2025, each of the dollar amounts in subsections (a), (b), and (c) shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year determined by substituting calendar year 2024 for calendar year 2016 in subparagraph (A)(ii) thereof. (2)

Rounding

(A)

In general

If the $500 dollar amount in subsection (a) and (c)(1) or the $2,500 amount in subsection (c)(1), after being increased under paragraph (1), is not a multiple of $10, such dollar amount shall be rounded to the next lowest multiple of $10. (B)

Asset threshold

If the $10,000,000 dollar amount in subsection (b)(2), after being increased under paragraph (1), is not a multiple of $10,000, such dollar amount shall be rounded to the next lowest multiple of $10,000. (C)

Other dollar amounts

If any dollar amount in subsection (b) or (c) (other than any amount to which subparagraph (A) or (B) applies), after being increased under paragraph (1), is not a multiple of $1,000, such dollar amount shall be rounded to the next lowest multiple of $1,000.

(B)

Information required to be sent to other taxpayers

Section 6724(d)(2) of such Code is amended— (i)by striking or at the end of subparagraph (KK), (ii)by striking the period at the end of the subparagraph (LL) and inserting a comma, and (iii)by inserting after subparagraph (LL) the following new subparagraphs:

(MM)section 6039K(c) (relating to disposition of qualified opportunity fund investments), or (NN)section 6039L (relating to information required from certain qualified opportunity zone businesses and qualified rural opportunity zone businesses).

(3)

Electronic filing

Section 6011(e) of such Code is amended by adding at the end the following new paragraph:

(8)

Qualified opportunity funds and qualified rural opportunity funds

Notwithstanding paragraphs (1) and (2), any return filed by a qualified opportunity fund or qualified rural opportunity fund shall be filed on magnetic media or other machine-readable form.

(4)

Clerical amendments

(A)The table of sections for subpart A of part III of subchapter A of chapter 61 of such Code is amended by inserting after the item relating to section 6039J the following new items:

Sec. 6039K. Returns with respect to qualified opportunity funds and qualified rural opportunity funds.

Sec. 6039L. Information required from qualified opportunity zone businesses and qualified rural opportunity zone businesses.

(B)The table of sections for part II of subchapter B of chapter 68 of such Code is amended by inserting after the item relating to section 6725 the following new item:

Sec. 6726. Failure to comply with information reporting requirements relating to qualified opportunity funds and qualified rural opportunity funds.

(5)

Effective date

The amendments made by this subsection shall apply to taxable years beginning after the date of the enactment of this Act. (e)

Secretary reporting of data on opportunity zone and rural opportunity zone tax incentives

(1)

In general

As soon as practical after the date of the enactment of this Act, and annually thereafter, the Secretary of the Treasury, or the Secretary’s delegate (referred to in this section as the Secretary), in consultation with the Director of the Bureau of the Census and such other agencies as the Secretary determines appropriate, shall make publicly available a report on qualified opportunity funds. (2)

Information included

The report required under paragraph (1) shall include, to the extent available, the following information: (A)The number of qualified opportunity funds. (B)The aggregate dollar amount of assets held in qualified opportunity funds. (C)The aggregate dollar amount of investments made by qualified opportunity funds in qualified opportunity fund property, stated separately for each North American Industry Classification System (NAICS) code. (D)The percentage of population census tracts designated as qualified opportunity zones that have received qualified opportunity fund investments. (E)For each population census tract designated as a qualified opportunity zone, the approximate average monthly number of full-time equivalent employees of the qualified opportunity zone businesses in such qualified opportunity zone for the preceding 12-month period (within numerical ranges identified by the Secretary) or such other indication of the employment impact of such qualified opportunity fund businesses as determined appropriate by the Secretary. (F)The percentage of the total amount of investments made by qualified opportunity funds in— (i)qualified opportunity zone property which is real property; and (ii)other qualified opportunity zone property. (G)For each population census tract, the aggregate approximate number of residential units resulting from investments made by qualified opportunity funds in real property. (H)The aggregate dollar amount of investments made by qualified opportunity funds in each population census tract. (3)

Additional information

(A)

In general

Beginning with the report submitted under paragraph (1) for the 6th year after the date of the enactment of this Act, the Secretary shall include in such report the impacts and outcomes of a designation of a population census tract as a qualified opportunity zone as measured by economic indicators, such as job creation, poverty reduction, new business starts, and other metrics as determined by the Secretary. (B)

Semi-decennial information

(i)

In general

In the case of any report submitted under paragraph (1) in the 6th year or the 11th year after the date of the enactment of this Act, the Secretary shall include the following information: (I)For population census tracts designated as a qualified opportunity zone, a comparison (based on aggregate information) of the factors listed in clause (iii) between the 5-year period ending on the date of the enactment of Public Law 115–97 and the most recent 5-year period for which data is available. (II)For population census tracts designated as a qualified opportunity zone, a comparison (based on aggregate information) of the factors listed in clause (iii) for the most recent 5-year period for which data is available between such population census tracts and a similar population census tracts that were not designated as a qualified opportunity zone. (ii)

Control groups

For purposes of clause (i), the Secretary may combine population census tracts into such groups as the Secretary determines appropriate for purposes of making comparisons. (iii)

Factors listed

The factors listed in this clause are the following: (I)The unemployment rate. (II)The number of persons working in the population census tract, including the percentage of such persons who were not residents in the population census tract in the preceding year. (III)Individual, family, and household poverty rates. (IV)Median family income of residents of the population census tract. (V)Demographic information on residents of the population census tract, including age, income, education, race, and employment. (VI)The average percentage of income of residents of the population census tract spent on rent annually. (VII)The number of residences in the population census tract. (VIII)The rate of home ownership in the population census tract. (IX)The average value of residential property in the population census tract. (X)The number of affordable housing units in the population census tract. (XI)The number and percentage of residents in the population census tract that were not employed for the preceding year. (XII)The number of new business starts in the population census tract. (XIII)The distribution of employees in the population census tract by North American Industry Classification System (NAICS) code. (4)

Protection of identifiable return information

In making reports required under this subsection, the Secretary— (A)shall establish appropriate procedures to ensure that any amounts reported do not disclose taxpayer return information that can be associated with any particular taxpayer or competitive or proprietary information, and (B)if necessary to protect taxpayer return information, may combine information required with respect to individual population census tracts into larger geographic areas. (5)

Definitions

Any term used in this subsection 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. (6)

Reports on qualified rural opportunity funds

The Secretary shall make publicly available, with respect to qualified rural opportunity funds, separate reports as required under this subsection, applied— (A)by substituting qualified rural opportunity for qualified opportunity each place it appears, (B)by substituting a reference to this Act for Public Law 115–97, and (C)by treating any reference (after the application of subparagraph (A)) to qualified rural opportunity zone stock, qualified rural opportunity zone partnership interest, qualified rural opportunity zone business, or qualified opportunity zone business property as stock, interest, business, or property, respectively, described in subclause (I) or (II), as the case may be, of section 1400Z–2(b)(2)(B)(vii) of the Internal Revenue Code of 1986.