Democratic lawmakers have been calling for more reforms and oversight when it comes to the Opportunity Zone program. Enacted under the 2017 Tax Cuts and Jobs Act (TCJA), it originally had bipartisan support. However, the Democrats have now ramped up their criticism regarding the transparency of the program to a significant level. They are criticizing it because of the increased controversies that surround its tax incentives. They also have issues with the law’s overall reporting requirements. They require a change to the Opportunity Zone legislation.
Wyden Introduces the Opportunity Zone Reform Bill
Ron Wyden, D-Ore., the ranking member of the Senate Finance Committee, was responsible for the introduction of reform legislation. On November 6, he introduced the Opportunity Zone Reporting & Reform Bill. The measure, in general, would demand more reporting from all QOFs (Qualified Opportunity Funds). It would eliminate all of the designated Opportunity Zones within areas that are not impoverished. The bill would also tighten and clarify several rules relating to investments. The Government Accountability Office (GAO) would also require a program review.
Here are the reforms contained in the bill as noted in a November 6 press release from Wyden:
- The bill requires fund investors to report information from annual IRS statements and Opportunity Funds annually to the public.
- It would eliminate loopholes that enable “sin list” investments, such as casinos, and prohibit investment in luxury apartments and stadiums.
- It will terminate zones that are not impoverished or low-income. However, states can replace any terminated zones.
- It would tighten existing rules to make certain the incentive will only go to new, productive investments.
- The GAO would require an extensive review.
Legislators Requested a GAO Study into Opportunity Zones
Richard Neal, D-Mass., chair of House Ways & Means Committee, and Wyden, among others, have requested a GAO study. In a letter dated November 4, the legislators requested that the GAO begin a full study of the Opportunity Zone program. Congress released the letter to the public on November 6. It stated lawmakers’ beliefs that the GAO should assist Congress when it comes to evaluating this incentive. It also stated the GAO should help to monitor the implementation of the incentive, as well as its outcomes. The letter goes on to say that this is imperative because of the scope of the Opportunity Zone incentive. They strongly believe that the GAO’s involvement is necessary because of the lack of any legal reporting requirements. This is especially the case when considering the increased level of interest reported by taxpayers.
Neal and Wyden Launch an Investigation
Neal and Wyden also announced there would be an investigation into the Treasury’s role within this Opportunity Zone program. The legislators sent a letter to Treasury Secretary Steven Mnuchin on November 4. According to this letter, Neal and Widen have based this investigation on press reports found in an article. Yet, just a week before, the IRS and the Treasury released draft Form 8996. This would increase specific QOF’s reporting requirements.
Both Democrats and Republicans immediately commended the action the Treasury Department was taking to increase the reporting requirements. The spokesperson for Sen. Tim Scott, R-S.C., spoke to Wolters Kluwer on the subject. Scott was the Opportunity Zone program’s chief architect. The spokes-
person said that reporting requirements were originally within the bill for passage by the TCJA. However, the Republicans removed the requirements because the Democrats blocked them. Not only that, but Scott has also brought in a bipartisan bill. This bill aims to strengthen and restore reporting requirements with regard to the Opportunity Zone program. As a result, the Opportunity Zone legislation should see positive change.
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