Lisa Starczewski, shareholder in the firm's Tax section and chair of the Opportunity Zones Practice Group, discusses the Trump administration's newest set of proposed guidelines for opportunity zones in Tampa Bay Business Journal's article "New Opportunity Zone Guidelines Expected to Loosen Regulations."
“Although plenty of opportunity zone funds have been created and money has moved, there are many who have delayed creating a fund and/or moving capital into specific projects due to a lack of regulatory certainty,” said Lisa Starczewski, co-chair of Tampa's Buchanan Ingersoll & Rooney’s tax section and co-chair of the firm's Opportunity Zones Team.
Starczewski said one of the most critical outstanding issues on the guidelines was how and to what extent the program could work in the context of investment in operating businesses.
“These regulations have provided much-needed answers with respect to this issue,” she said.
Some of the most crucial answers the guidelines provide, according to Starczewski, include:
- A previous requirement said that a business must derive at least half of its gross income from active conduct or trade in the opportunity zone. The new regulations have provided a broad interpretation that will allow different types of businesses to qualify for tax incentives.
- The regulations provide “generous, flexible income sourcing rules.” There are three safe harbors that a business can rely on and if none of those apply, a general facts and circumstances test can be administered.
- The regulations pave a clear path for tech startups in opportunity zones.
- The regulations allow different types of businesses to qualify, including service providers and businesses managed from within a zone and store their tangible property within a zone but have a customer base outside the zone.
- The regulations clarify that the ownership and operation of real property, including leasing, is considered active conduct of a trade or business.
- The regulations expand the working capital safe harbor to include the development of a trade or business.
There was concern among Tampa Bay area investors that the 31-month period would delay projects that require extensive local, state or federal permitting, Starczewski said.
“These regulations address that concern and allow for delays that are attributable to a waiting period for government action,” she said.
The article was also picked up by the Washington Business Journal, "New Opportunity Zone Regulations Expected to Loosen Regulations" and also by WTOP.