The House Ways and Means Committee released its version of the proposed reconciliation bill, which will be “marked up” in the Committee on May 13, 2025. Included in this proposal are amendments regarding Qualified Opportunity Zone (QOZ) investments that would:
- Extend the QOZ incentive by seven years, permitting investments in QOZs to be made until Dec. 31, 2033.
- Provide for designations of new QOZs for investments made on or after Jan. 1, 2027, including a requirement that at least 33% be rural zones.
- Add a 10% basis step-up for Opportunity Zone investments made after Dec. 31, 2026, that are held for at least five years through 2033.
- Favor designation of rural QOZs over urban QOZs by:
| – | Increasing the five-year 10% basis step-up to a 30% basis step-up for qualified rural investments. |
| – | Reducing the Substantial Improvement Requirement from 100% to 50% for rural projects (including data center projects). |
- Apply the new rules to QOZ investments made from Jan. 1, 2027, to Dec. 31, 2033. Investments made in 2026 would continue to use the existing rules (including deferral only until Dec. 31, 2026).
- Deferral of capital gain taxes for investments made after Dec. 31, 2026, until Dec. 31, 2033.
- Allow annual deferral until Dec. 31, 2033, of up to $10,000 of ordinary income invested in a Qualified Opportunity Fund after Dec. 31, 2026.
- Add expansive reporting requirements for both Qualified Opportunity Funds and Qualified Opportunity Zone Businesses.
- Impose non-reporting penalties on QOFs ($10,000 for smaller QOFs and $50,000 for larger QOFs up to maximum penalty limits).
- Increase non-reporting penalties for intentional disregard of reporting requirements.
The tax provisions applicable for “The One, Big, Beautiful Bill” have been released by the Ways and Means Committee for mark-up on May 13 at 2:30 p.m. EDT. The industry may have opportunities to help with substantive suggestions if the bill passes the House and makes its way to the U.S. Senate. In the Senate, the chairs of the Senate Finance Committee and the House Banking Committee are both proponents of the impact of Qualified Opportunity Zones nationwide and support meaningful reform for the incentive.