[Congressional Record Volume 163, Number 196 (Friday, December 1, 2017)]
[Senate]
[Pages S7727-S7729]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 1833. Mr. SCOTT (for himself and Mr. Portman) submitted an
amendment intended to be proposed by him to the bill H.R. 1, to provide
for reconciliation pursuant to titles II and V of the concurrent
resolution on the budget for fiscal year 2018; which was ordered to lie
on the table; as follows:
Strike section 13823 and insert the following:
SEC. 13823. OPPORTUNITY ZONES.
(a) In General.--Chapter 1 is amended by adding at the end
the following:
``Subchapter Z--Opportunity Zones
``Sec. 1400Z-1. Designation.
``Sec. 1400Z-2. Special rules for capital gains invested in opportunity
zones.
``SEC. 1400Z-1. DESIGNATION.
``(a) Qualified Opportunity Zone Defined.--For the purposes
of this subchapter, the term `qualified opportunity zone'
means a population census tract that is a low-income
community that is designated as a qualified opportunity zone.
``(b) Designation.--
``(1) In general.--For purposes of subsection (a), a
population census tract that is a low-income community is
designated as a qualified opportunity zone if--
``(A) not later than the end of the determination period,
the governor of the State in which the tract is located--
``(i) nominates the tract for designation as a qualified
opportunity zone, and
``(ii) notifies the Secretary in writing of such
nomination, and
``(B) the Secretary certifies such nomination and
designates such tract as a qualified opportunity zone before
the end of the consideration period.
``(2) Extension of periods.--A governor may request that
the Secretary extend either the determination or
consideration period, or both (determined without regard to
this subparagraph), for an additional 30 days.
``(c) Other Definitions.--For purposes of this subsection--
``(1) Low-income communities.--The term `low-income
community' has the same meaning as when used in section
45D(e).
``(2) Definition of periods.--
``(A) Consideration period.--The term `consideration
period' means the 30-day period beginning on the date on
which the Secretary receives notice under subsection
(b)(1)(A)(ii), as extended under subsection (b)(2).
``(B) Determination period.--The term `determination
period' means the 90-day period beginning on the date of the
enactment of the Tax Cuts and Jobs Act, as extended under
subsection (b)(2).
``(3) State.--For purposes of this section, the term
`State' includes any possession of the United States.
``(d) Number of Designations.--
``(1) In general.--Except as provided by paragraph (2), the
number of population census tracts in a State that may be
designated as qualified opportunity zones under this section
may not exceed 25 percent of the number of low-income
communities in the State.
``(2) Exception.--If the number of low-income communities
in a State is less than 100, then a total of 25 of such
tracts may be designated as qualified opportunity zones.
``(e) Designation of Tracts Contiguous With Low-Income
Communities.--
``(1) In general.--A population census tract that is not a
low-income community may be designated as a qualified
opportunity zone under this section if--
``(A) the tract is contiguous with the low-income community
that is designated as a qualified opportunity zone, and
``(B) the median family income of the tract does not exceed
125 percent of the median family income of the low-income
community with which the tract is contiguous.
``(2) Limitation.--Not more than 5 percent of the
population census tracts designated in a State as a qualified
opportunity zone may be designated under paragraph (1).
``(f) Period for Which Designation Is in Effect.--A
designation as a qualified opportunity zone shall remain in
effect for the period beginning on the date of the
designation
[[Page S7728]]
and ending at the close of the 10th calendar year beginning
on or after such date of designation.
``SEC. 1400Z-2. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN
OPPORTUNITY ZONES.
``(a) In General.--In the case of gain from the sale to, or
exchange with, an unrelated person of any property held by
the taxpayer, at the election of the taxpayer--
``(1) gross income for the taxable year shall not include
so much of such gain as does not exceed the aggregate amount
invested by the taxpayer in a qualified opportunity fund
during the 180-day period beginning on the date of such sale
or exchange,
``(2) the amount of gain excluded by paragraph (1) shall be
included in gross income as provided by subsection (b), and
``(3) subsection (c) shall apply.
No election may be made under the preceding sentence with
respect to a sale or exchange if an election previously made
with respect to such sale or exchange is in effect.
``(b) Deferral of Gain Invested in Opportunity Zone
Property.--
``(1) Year of inclusion.--Gain to which subsection (a)(2)
applies shall be included in income in the taxable year which
includes the earlier of--
``(A) the date on which such investment is sold or
exchanged, or
``(B) December 31, 2026.
``(2) Amount includible.--
``(A) In general.--The amount of gain included in gross
income under subsection (a)(1) shall be the excess of--
``(i) the lesser of the amount of gain excluded under
paragraph (1) or the fair market value of the property as
determined as of the date described in paragraph (1), over
``(ii) the taxpayer's basis in the investment.
``(B) Determination of basis.--
``(i) In general.--Except as otherwise provided in this
clause or subsection (c), the taxpayer's basis in the
investment shall be zero.
``(ii) Increase for gain recognized under subsection
(a)(2).--The basis in the investment shall be increased by
the amount of gain recognized by reason of subsection (a)(2)
with respect to such property.
``(iii) Investments held for 5 years.--In the case of any
investment held for at least 5 years, the basis of such
investment shall be increased by an amount equal to 10
percent of the amount of gain deferred by reason of
subsection (a)(1).
``(iv) Investments held for 7 years.--In the case of any
investment held by the taxpayer for at least 7 years, in
addition to any adjustment made under clause (iii), the basis
of such property shall be increased by an amount equal to 5
percent of the amount of gain deferred by reason of
subsection (a)(1).
``(c) Special Rule for Investments Held for at Least 10
Years.--In the case of any investment held by the taxpayer
for at least 10 years and with respect to which the taxpayer
makes an election under this clause, the basis of such
property shall be equal to the fair market value of such
investment on the date that the investment is sold or
exchanged.
``(d) Qualified Opportunity Fund.--For purposes of this
section--
``(1) Qualified opportunity fund.--The term `qualified
opportunity fund' means any investment vehicle 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--
``(A) on the last day of the first 6-month period of the
taxable year of the fund, and
``(B) on the last day of the taxable year of the fund.
``(2) Qualified opportunity zone property.--
``(A) In general.--The term `qualified opportunity zone
property' means property which is--
``(i) qualified opportunity zone stock,
``(ii) qualified opportunity zone partnership interest, or
``(iii) qualified opportunity zone business property.
``(B) Qualified opportunity zone stock.--
``(i) In general.--Except as provided in clause (ii), the
term `qualified opportunity zone stock' means any stock in a
domestic corporation if--
``(I) such stock is acquired by the taxpayer after December
31, 2017, at its original issue (directly or through an
underwriter) from the corporation solely in exchange for
cash,
``(II) as of the time such stock was issued, such
corporation was a qualified opportunity zone business (or, in
the case of a new corporation, such corporation was being
organized for purposes of being a qualified opportunity zone
business), and
``(III) during substantially all of the taxpayer's holding
period for such stock, such corporation qualified as a
qualified opportunity zone business.
``(ii) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this paragraph.
``(C) Qualified opportunity zone partnership interest.--The
term `qualified opportunity zone partnership interest' means
any capital or profits interest in a domestic partnership
if--
``(i) such interest is acquired by the taxpayer after
December 31, 2017, from the partnership solely in exchange
for cash,
``(ii) as of the time such interest was acquired, such
partnership was a qualified opportunity zone business (or, in
the case of a new partnership, such partnership was being
organized for purposes of being a qualified opportunity zone
business), and
``(iii) during substantially all of the taxpayer's holding
period for such interest, such partnership qualified as a
qualified opportunity zone business.
``(D) Qualified opportunity zone business property.--
``(i) In general.--The term `qualified opportunity zone
business property' means tangible property used in a trade or
business of the taxpayer if--
``(I) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after December 31,
2017,
``(II) the original use of such property in the qualified
opportunity zone commences with the taxpayer or the taxpayer
substantially improves the property, and
``(III) during substantially all of the taxpayer's holding
period for such property, substantially all of the use of
such property was in a qualified opportunity zone.
``(ii) Substantial improvement.--For purposes of
subparagraph (A)(ii), property shall be treated as
substantially improved by the taxpayer only if, during any
30-month period beginning after the date of acquisition of
such property, additions to basis with respect to such
property in the hands of the taxpayer exceed an amount equal
to the adjusted basis of such property at the beginning of
such 30-month period in the hands of the taxpayer.
``(iii) Related party.--For purposes of subparagraph
(A)(i), the related person rule of section 179(d)(2) shall be
applied pursuant to paragraph (8) of this subsection in lieu
of the application of such rule in section 179(d)(2)(A).
``(3) Qualified opportunity zone business.--
``(A) In general.--The term `qualified opportunity zone
business' means a trade or business--
``(i) in which substantially all of the tangible property
owned or leased by the taxpayer is qualified opportunity zone
business property,
``(ii) which satisfies the requirements of paragraphs (2),
(4), and (8) of section 1397C(b), and
``(iii) which is not described in section 144(c)(6)(B).
``(B) Special rule.--For purposes of subparagraph (A),
tangible property that ceases to be a qualified opportunity
zone business property shall continue to be treated as a
qualified opportunity zone business property for the lesser
of--
``(i) 5 years after the date on which such tangible
property ceases to be so qualified, or
``(ii) the date on which such tangible property is no
longer held by the qualified opportunity zone business.
``(e) Applicable Rules.--
``(1) Treatment of investments with mixed funds.--In the
case of any investment in a qualified opportunity fund only a
portion of which consists of investments of gain to which an
election under subsection (a)(1) is in effect--
``(A) such investment shall be treated as 2 separate
investments, consisting of--
``(i) one investment that only includes amounts to which
the election under subsection (a)(1) applies, and
``(ii) a separate investment consisting of other amounts,
and
``(B) subsections (a), (b), and (c) shall only apply to the
investment described in subparagraph (A)(i).
``(2) Related persons.--For purposes of this section,
persons are related to each other if such persons are
described in section 267(b) or 707(b)(1), determined by
substituting `20 percent' for `50 percent' each place it
occurs in such sections.
``(3) Decedents.--In the case of a decedent, amounts
recognized under this section shall, if not properly
includible in the gross income of the decedent, be includible
in gross income as provided by section 691.
``(4) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section, including--
``(A) rules for the certification of qualified opportunity
funds for the purposes of this section, and
``(B) rules to prevent abuse.
``(f) Failure of Qualified Opportunity Fund to Maintain
Investment Standard.--
``(1) In general.--If a qualified opportunity fund fails to
meet the 90-percent requirement of subsection (c)(1), the
qualified opportunity fund shall pay a penalty for each month
it fails to meet the requirement in an amount equal to the
product of--
``(A) the excess of--
``(i) the amount equal to 90 percent of its aggregate
assets, over
``(ii) the aggregate amount of qualified opportunity zone
property held by the fund, multiplied by
``(B) the underpayment rate established under section
6621(a)(2) for such month.
``(2) Special rule for partnerships.--In the case that the
qualified opportunity fund is a partnership, the penalty
imposed by paragraph (1) shall be taken into account
proportionately as part of the distributive share of each
partner of the partnership.
``(3) Reasonable cause exception.--No penalty shall be
imposed under this subsection with respect to any failure if
it is shown that such failure is due to reasonable cause.''.
[[Page S7729]]
(b) Basis Adjustments.--Section 1016(a) is amended by
striking ``and'' at the end of paragraph (36), by striking
the period at the end of paragraph (37) and inserting ``,
and'', and by inserting after paragraph (37) the following:
``(38) to the extent provided in subsections (b)(2) and (c)
of section 1400Z-2.''.
(c) Clerical Amendment.--The table of subchapters for
chapter 1 is amended by adding at the end the following new
item:
``subchapter z. opportunity zones''.
(d) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
______