February 9, the Internal Revenue Service (IRS) issued Revenue Procedure 2018-16 providing guidance to state and territorial governors and the mayor of the District of Columbia on the necessary procedure for designating census tracts as Qualified Opportunity Zones (QOZ) in order to take advantage of the new Opportunity Zones program established in the recently enacted tax reform bill. The Opportunity Zones program allows taxpayers specialized tax treatment, including deferred capital gains, for investments in Opportunity Funds, which must in turn invest at least 90 percent of their assets in businesses located in certain low-income communities designated by governors as QOZs.
The notice provides guidance on which census tracts may be designated as QOZs, including those in "low-income communities" as defined by the code and certain census tracts that are contiguous with low-income communities. Governors must nominate census tracts for QOZ status by March 21 or may request a 30 day extension from that deadline. Upon receiving the nominations, the Secretary of the Treasury will have up to 30 days to certify and formally designate nominated tracts as QOZs.
IRS has developed an on-line Nomination Tool to assist governors in making QOZ designations. Further information on the nomination process, including how to access the Nomination Tool, will be sent individually to governors.