Opportunity-zone investors and developers have been gearing up to take advantage of one of the most attractive tax incentives in 2019. However, they will be slowed down thanks to the US government shutdown.
Opportunity Zone Investments
Opportunity Zones were introduced as part of the Tax Cuts and Jobs Act in 2017. The goal of this national program was to use tax incentives to encourage real estate investors to invest private capital into low-income communities. The program hopes to spur economic development and job growth in these communities as private investors in the US hold an estimated $6.1 trillion in unrealized capital gain that could make a real difference for communities in need.
Related: Investing in Opportunity Zones: A Creative RE Investment?
Opportunity-zone investors around the nation have already raised hundreds of millions of dollars, ready to invest in some of the 9,000 designated zones. And real estate developers have been planning for new projects and improvements on existing real estate properties. However, the US government shutdown is keeping any investments from being made as of yet.
The Impact of the Shutdown
Starting in December of 2018, the month-long US government shutdown has impacted many different areas of the national housing market on top of its devastating impact on government workers.
Related: The Impact of the Government Shutdown on the US Housing Market
The issue is now reaching the Opportunity Zones because while the idea of tax incentives was clearly outlined, there are still many regulations that the Treasury Department must clarify and finalize before Opportunity-zone investors can confidently make any moves.
A public hearing that was to address the regulations of investments in Opportunity Zones was postponed by the IRS due to the shutdown. No new date has been announced for the hearing, as noted by the written statement given by the IRS:
“A new public hearing date on these proposed regulations will be announced once appropriations for the Department of the Treasury have been restored.”
Opportunity-zone investors are becoming more and more frustrated every day as the benefits of the promised tax deferral incentives loses value over time. Even though the Treasury Department began to draft the guidelines in October 2018, many things are still left unclear, only complicating things for real estate investors. Before the hearing was canceled, investors were requesting feedback on how to define terms such as “substantial improvements” and “original use”- terms that are key to being able to take advantage of the tax breaks.
While this is a normal side effect of a process that requires many reviews and public input, it’s being severely hindered by the US government shutdown, leaving many Opportunity-zone investors in the dark for now.
If you’re still looking for an Opportunity Zone to invest in, consider one of the 21 Best Opportunity Zones to Invest in Real Estate in the US.
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