,,ii #aaeth ,,congress #ast ,session ,s4 #bic ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,february #b1 #bjag ,mr4 ,scott 7for himself1 ,mr4 ,booker1 ,mr4 ,blunt1 ,mr4 ,bennet1 ,mr4 ,graham1 ,mr4 ,coons1 ,mrs4 ,capito1 ,mrs4 ,gillibrand1 ,mr4 ,peters1 ,mr4 ,gardner1 ,mr4 ,young1 and ,mr4 ,warner7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide for the deferral of inclusion in gross income for capital gains reinvested in opportunity zones4 #a4 ,short title ,this ,act may be cited as the ,investing in ,opportunity ,act4 #b4 ,opportunity zones 7a7 ,in general ,chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following3 ,z ,opportunity ,zones ,sec4 #adjj,z-#a4 ,designation4 ,sec4 #adjj,z-#b4 ,deferral for capital gains invested in opportunity zones4 #adjj,z-#a4 ,designation 7a7 ,qualified opportunity zone defined ,for the purposes of this subchapter1 the term qualified opportunity zone means a population census tract that is a low-income community that is designated as a qualified opportunity zone4 7b7 ,designation 7#a7 ,governor 7,a7 ,in general ,for purposes of subsection 7a71 a population census tract that is a low-income community is designated as a qualified opportunity zone if-- 7i7 not later than the end of the determination period1 the governor of the ,state in which the tract is located-- 7,i7 nominates the tract for designation as a qualified opportunity zone1 and 7,,ii7 notifies the ,secretary in writing of such nomination1 and 7ii7 the ,secretary certifies such nomination and designates such tract as a qualified opportunity zone before the end of the consideration period4 7,b7 ,extension of periods ,a governor may request that the ,secretary extend either the determination or consideration period1 or both 7determined without regard to this subparagraph71 for an additional #cj days4 7,c7 ,deemed designation if ,secretary fails to act ,unless the tracts are ineligible for designation1 if the ,secretary declines in writing to make such certification and designation or fails to act before the end of the consideration period1 such nomination shall be deemed to be certified and designated1 effective on the day after the last day of the consideration period4 7#b7 ,secretary ,if a governor fails to make the nominations and notifications by the end of the periods referred to in paragraphs 7#a77;,a7 and 7#a77;,b71 the ,secretary shall designate and certify population census tracts that are low-income communities as qualified opportunity zones1 as permitted by subsection 7e74 7c7 ,other definitions ,for purposes of this subsection-- 7#a7 ,low-income communities ,the term low-income community has the same meaning as when used in section #de;,d7e74 7#b7 ,definition of periods 7,a7 ,consideration period ,the term consideration period means the #cj-;day period beginning on the date on which the ,secretary receives notice under subsection 7b77#a77;,a77i77,,ii71 as extended under subsection 7b77#a77;,b74 7,b7 ,determination period ,the term determination period means the #ij-;day period beginning on the date of the enactment of the ,investing in ,opportunity ,act1 as extended under subsection 7b77#a77;,b74 7d7 ,guidance for opportunity zone nominations ,when considering the nomination of qualified opportunity zones1 governors should strive for the creation of qualified opportunity zones that are geographically concentrated and contiguous clusters of population census tracts and should give particular consideration to areas that-- 7#a7 are currently the focus of mutually reinforcing ,state1 local1 or private economic development initiatives to attract investment and foster startup activity1 7#b7 have demonstrated success in geographically targeted development programs1 such as promise zones1 new market tax credit1 empowerment zones1 and renewal communities1 and 7#c7 have recently experienced significant layoffs due to business closures or relocations4 7e7 ,number of designations 7#a7 ,in general ,except as provided by paragraph 7#b71 the number of population census tracts in a ,state that may be designated as qualified opportunity zones under this section may not exceed #be percent of the number of low-income communities in the ,state4 7#b7 ,exception ,if the number of low-income communities in a ,state is less than #ajj1 then a total of #be of such tracts may be designated as qualified opportunity zones4 7f7 ,designation of tracts contiguous with low-,income communities 7#a7 ,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-- 7,a7 the tract is contiguous with the low-income community that is designated as a qualified opportunity zone1 and 7,b7 the median family income of the tract does not exceed #abe percent of the median family income of the low-income community with which the tract is contiguous4 7#b7 ,limitation ,not more than #e percent of the population census tracts designated in a ,state as a qualified opportunity zone may be designated under paragraph 7#a74 7g7 ,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 and ending at the close of the #ajth calendar year beginning on or after such date of designation4 #adjj,z-#b4 ,deferral for capital gains invested in opportunity zones 7a7 ,special rules when gain from sale of property invested in opportunity zone property 7#a7 ,exclusion of gain invested in opportunity zone property ,in the case of gain from the sale to1 or exchange with1 an unrelated person of any property held by the taxpayer1 at the election of the taxpayer-- 7,a7 gross income for the taxable year shall not include so much of such gain as does not exceed the aggregate cost of all qualified opportunity zone property acquired by the taxpayer during the #ahj-;day period beginning on the date of such sale or exchange1 and 7,b7 the amount of gain excluded by subparagraph 7,a7 shall be included in gross income as provided by paragraph 7#b74 7#b7 ,deferral of gain invested in opportunity zone property 7,a7 ,year of inclusion ,except as provided by subparagraph 7,c71 gain to which paragraph 7#a77;,b7 applies shall be included in income in the taxable year in which the qualified opportunity zone property related to such gain is sold or exchanged in the amount determined under subparagraph 7,b74 7,b7 ,amount includible ,the amount of gain determined under this clause shall be-- 7i7 #ajj percent of such gain in the case of the sale or exchange of the qualified opportunity zone property with respect to which gain is deferred under paragraph 7#a7 that is held for less than #e years1 7ii7 #ij percent of such gain in the case of the sale or exchange of the qualified opportunity zone property with respect to which gain is deferred under paragraph 7#a7 that is held for at least #e years but less than #g years1 and 7iii7 #he percent of such gain in the case of the sale or exchange of the qualified opportunity zone property with respect to which gain is deferred under paragraph 7#a7 that is held for at least #g years4 7,c7 ,property held after #bjbf treated as sold ,for purposes of subparagraph 7,a71 any qualified opportunity zone property that has not been sold or exchanged on or before ,december #ca1 #bjbf1 shall be treated as sold on ,december #ca1 #bjbf4 7#c7 ,exclusion of gain on qualified opportunity zone property held for at least #aj years ,except as provided in paragraph 7#b71 in the case of the sale or exchange of qualified opportunity zone property1 or an investment in a qualified opportunity fund1 held for at least #aj years1 gross income for the taxable year shall not include any gain from the sale or exchange of such property or investment4 7#d7 ,one election per property ,no election may be made under paragraph 7#a7 with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect4 7b7 ,basis rules relating to qualified opportunity zone property 7#a7 ,reduced by gain deferred under subsection 7a77#a7 ,the basis of a qualified opportunity zone property immediately after its acquisition under subsection 7a7 shall be reduced by the amount of gain deferred by reason of subsection 7a77#a77;,a7 with respect to such property4 7#b7 ,increase for gain recognized under subsection 7a77#b7 ,the basis of qualified opportunity zone property shall be increased by the amount of gain recognized by reason of subsection 7a77#b7 with respect to such property4 7#c7 ,subsequent increase in basis for property held for at least #e years but less than #aj years ,in the case of qualified opportunity zone property held for at least #e years but less than #aj years-- 7,a7 ,property held for #e years ,for qualified opportunity zone property held for at least #e years1 the basis of such property shall be increased by an amount equal to #aj percent of the amount of gain deferred by reason of subsection 7a77#a77;,a7 with respect to such property4 7,b7 ,property held for #g years ,for qualified opportunity zone property held for at least #g years1 the basis of such property shall be increased by an amount equal to #e percent of the amount of gain deferred by reason of subsection 7a77#a77;,a7 with respect to such property4 7c7 ,qualified opportunity zone property ,for purposes of this section3 7#a7 ,in general ,the term qualified opportunity zone property means property which is-- 7,a7 qualified opportunity zone stock1 7,b7 qualified opportunity zone partnership interest1 7,c7 qualified opportunity zone business property1 or 7,d7 an interest in a qualified investment fund4 7#b7 ,qualified opportunity zone stock 7,a7 ,in general ,except as provided in subparagraph 7,b71 the term qualified opportunity zone stock means any stock in a domestic corporation if-- 7i7 such stock is acquired by the taxpayer after ,december #ca1 #bjag1 at its original issue 7directly or through an underwriter7 from the corporation solely in exchange for cash1 7ii7 as of the time such stock was issued1 such corporation was a qualified opportunity zone business 7or1 in the case of a new corporation1 such corporation was being organized for purposes of being a qualified opportunity zone business71 and 7iii7 during substantially all of the taxpayer's holding period for such stock1 such corporation qualified as a qualified opportunity zone business4 7,b7 ,redemptions ,a rule similar to the rule of section #abjb7;c77#c7 shall apply for purposes of this paragraph4 7#c7 ,qualified opportunity zone partnership interest ,the term qualified opportunity zone partnership interest means any capital or profits interest in a domestic partnership if-- 7,a7 such interest is acquired by the taxpayer after ,december #ca1 #bjag1 from the partnership solely in exchange for cash1 7,b7 as of the time such interest was acquired1 such partnership was a qualified opportunity zone business 7or1 in the case of a new partnership1 such partnership was being organized for purposes of being a qualified opportunity zone business71 and 7,c7 during substantially all of the taxpayer's holding period for such interest1 such partnership qualified as a qualified opportunity zone business4 7#d7 ,qualified opportunity zone business property 7,a7 ,in general ,the term qualified opportunity zone business property means tangible property used in a trade or business of the taxpayer if-- 7i7 such property was acquired by the taxpayer by purchase 7as defined in section #agi7;d77#b77 after ,december #ca1 #bjag1 7ii7 the original use of such property in the qualified opportunity zone commences with the taxpayer or the taxpayer substantially improves the property1 and 7iii7 during substantially all of the taxpayer's holding period for such property1 substantially all of the use of such property was in a qualified opportunity zone4 7,b7 ,substantial improvement ,for purposes of subparagraph 7,a77ii71 property shall be treated as substantially improved by the taxpayer only if1 during any #cj-month period beginning after the date of acquisition of such property1 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 #cj-month period in the hands of the taxpayer4 7,c7 ,related party ,for purposes of subparagraph 7,a77i71 the related person rule of section #agi7;d77#b7 shall be applied pursuant to paragraph 7#h7 of this subsection in lieu of the application of such rule in section #agi7;d77#b77;,a74 7#e7 ,qualified opportunity fund ,the term qualified opportunity fund means any investment vehicle organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property 7other than another qualified opportunity fund7 that holds at least #ij percent of its assets in qualified opportunity zone property1 determined-- 7,a7 on the last day of the first #f-month period of the taxable year of the fund1 and 7,b7 on the last day of the taxable year of the fund4 7#f7 ,qualified opportunity zone business 7,a7 ,in general ,the term qualified opportunity zone business means a trade or business-- 7i7 in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property1 7ii7 which satisfies the requirements of paragraphs 7#b71 7#d71 and 7#h7 of section #acig;,c7b71 and 7iii7 which is not described in section #add7;c77#f77;,b74 7,b7 ,special rule ,for purposes of subparagraph 7,a71 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-- 7i7 #e years after the date on which such tangible property ceases to be so qualified1 or 7ii7 the date on which such tangible property is no longer held by the qualified opportunity zone business4 7d7 ,applicable rules 7#a7 ,in general ,for purposes of this section and except as otherwise provided in this section1 rules similar to the rules applicable to deferred like kind exchanges under section #ajca shall apply except that reinvestment in opportunity zone property need not require an intermediary party4 7#b7 ,related persons ,for purposes of this subsection1 persons are related to each other if such persons are described in section #bfg7;b7 or #gjg7;b77#a71 determined by substituting #bj percent for #ej percent each place it occurs in such sections4 7#c7 ,decedents ,in the case of a decedent1 amounts recognized under this section shall1 if not properly includible in the gross income of the decedent1 be includible in gross income as provided by section #fia4 7#d7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section1 including-- 7,a7 rules providing for proportionate inclusion in income and increases in basis for purposes of subsections 7a7 and 7b7 in cases in which a sale or exchange of any qualified opportunity zone property with respect to which gain is deferred under subsection 7a77#a77;,a7 is less than all of such property1 7,b7 rules requiring taxpayers to provide such information as the ,secretary determines to be necessary or appropriate for the identification of both the assets sold 7including basis and sale price7 and the assets acquired and investments made1 and 7,c7 rules to prevent abuse4 7e7 ,failure of qualified opportunity fund ,to maintain investment standard 7#a7 ,in general ,if a qualified opportunity fund fails to meet the #ij-percent requirement of subsection 7c77#e71 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-- 7,a7 the excess of-- 7i7 the amount equal to #ij percent of its aggregate assets1 over 7ii7 the aggregate amount of qualified opportunity zone property held by the fund1 multiplied by 7,b7 the underpayment rate established under section #ffba7;a77#b7 for such month4 7#b7 ,special rule for partnerships ,in the case that the qualified opportunity fund is a partnership1 the penalty imposed by paragraph 7#a7 shall be taken into account proportionately as part of the distributive share of each partner of the partnership4 7#c7 ,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 cause4 4 7b7 ,basis adjustments ,section #ajaf7;a7 of such ,code is amended by striking and at the end of paragraph 7#cf71 by striking the period at the end of paragraph 7#cg7 and inserting 1 and1 and by inserting after paragraph 7#cg7 the following3 7#ch7 to the extent provided in section #adjj,z-#b7;b74 4 7c7 ,report to ,congress ,the ,secretary of the ,treasury1 or the ,secretary's delegate1 shall submit a report to ,congress on the opportunity zone incentives enacted by this section beginning #e years after the date of enactment of this ,act and annually thereafter4 ,the report shall include an assessment of investments held by qualified opportunity funds nationally and at the ,state level4 ,to the extent such information is available1 the report shall include the number of qualified opportunity funds1 the amount of assets held in qualified opportunity funds1 the composition of qualified opportunity fund investments by asset class1 the percentage of qualified opportunity zone census tracts designated under subchapter ,z of the ,internal ,revenue ,code of #aihf 7as added by this section7 that have received qualified opportunity fund investments4 ,the report shall also include an assessment of the impacts and outcomes of the investments in those areas on economic indicators including job creation1 poverty reduction1 and new business starts1 and other metrics as determined by the ,secretary4 7d7 ,clerical amendment ,the table of subchapters for chapter #a of such ,code is amended by adding at the end the following new item3 ,subchapter ,z4 ,opportunity zones 4 7e7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4