To amend the Internal Revenue Code of 1986 to renew and enhance opportunity zones, and for other purposes.
Sponsored By: Representative Kelly (PA)
Introduced
Summary
Refocus Qualified Opportunity Zones toward rural areas and impose strict fund reporting. This bill would redefine which census tracts qualify, create a new rural-focused designation round, boost tax basis incentives for rural-targeted funds, and require annual electronic reporting by funds.
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- Would change basis step-up rules for investments made after Dec. 31, 2026: a 5-year holding increases basis by 10% and a Qualified Rural Opportunity Fund would get a 30% basis boost.
- Would authorize a new designation round allowing up to 25% of a State's low-income communities to be designated as Qualified Opportunity Zones from Jan 1, 2027 through Dec. 31, 2033, and disqualify tracts with median family income at least 125% of the area median.
- Would require every Qualified Opportunity Fund to file an annual electronic return with asset, investment, location, and employment details, and sets penalties at $500 per day capped at $10,000 for failures with higher caps for large funds or intentional disregard.
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Bill Overview
Analyzed Economic Effects
4 provisions identified: 1 benefits, 2 costs, 1 mixed.
Investor basis boost and deferral
If enacted, investors would get bigger tax breaks and more timing flexibility for Opportunity Zone investments. For investments made after Dec 31, 2026, holding at least five years would increase your basis by 10% of the gain you deferred. If the investment is in a qualified rural opportunity fund, that basis increase would be 30%. You could also elect to defer up to $10,000 of ordinary income each tax year, reduced by prior elections. The bill would extend the election and inclusion deadline for a new designation round from Dec 31, 2026 to Dec 31, 2033.
Annual reporting and penalties for funds
If enacted, every qualified Opportunity Fund and qualified rural fund would file an annual machine-readable return with detailed investment, tract, asset, and employment data. Funds must give written statements to people who sold investments. Applicable businesses must give information to funds so funds can report. The bill would create per-day penalties for missing returns (generally $500 per day, capped and larger caps for big funds), and higher penalties for intentional disregard. The Treasury would also publish yearly public reports on fund counts, assets, investments, jobs, and housing, with impact measures starting in the sixth report.
Tighter low-income tract rules
If enacted, the bill would tighten what counts as a "low-income community" for Opportunity Zone designation. It would use 70% (not 80%) in one income test and disqualify any tract whose median family income is at least 125% of the state or metro median. Fewer tracts could qualify for designation under these rules.
New rural opportunity zone rules
If enacted, the bill would add a new Opportunity Zone designation round from Jan 1, 2027 through Dec 31, 2033 that prioritizes rural tracts. A new "qualified rural opportunity fund" definition would require at least 90% of fund assets in rural QOZ property for investments after Dec 31, 2026. Owners of property in fully rural QOZ tracts would use 50% of adjusted basis to measure building improvements for certain tax rules. The bill would also end the initial Opportunity Zone designations on Dec 31, 2026 except for tracts redesignated under the new round.
Sponsors & CoSponsors
Sponsor
Kelly (PA)
PA • R
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
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