Opportunity Zone Backers Seek Simple, Flexible Rules

June 18, 2018

The Honorable David J. Kautter
Acting Commissioner of the Internal Revenue Service and
Assistant Secretary of the Treasury for Tax Policy
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Acting Commissioner Kautter:

We write as a broad coalition of stakeholders regarding implementation of Opportunity Zones, a provision in the Tax Cuts and Jobs Act providing tax benefits for certain private investments in America's low-income communities.

Opportunity Zones have the potential to become the most impactful federal incentive for equity capital investment in low-income communities ever enacted. This incentive is designed to tap the country's vast unrealized corporate and individual capital gains holdings, encouraging investors to redeploy their earnings to finance new and expanded business activity in low-income areas nationwide. Congress envisioned a broad array of investors, funds, and use cases in the design of the Opportunity Zones provision and intended it to find application in a wide variety of urban, suburban, and rural communities. Timely implementation by the U.S. Department of Treasury and the Internal Revenue Service will be crucial to achieving the outcomes Congress intended.

In particular, it is essential that forthcoming administrative rules and guidance preserve and enhance the key characteristics of the Opportunity Zones design. These include:

• Flexibility: Low-income communities have a wide range of financing needs. The flexibility of the Opportunity Zones incentive provides the potential to support a variety mutually reinforcing activities within a single community as well as across a broad spectrum of communities.

• Scalability: There is no statutory cap on the amount of capital that can flow to Opportunity Zones in any given year. As such, Opportunity Zones have the potential to help fuel economic renewal in distressed communities on an unprecedented scale.

• Simplicity: Complexity has often been the Achilles heel of policies aimed at unlocking private capital in low-income areas. Complexity adds cost, time, and risk to business transactions, biasing programs towards a narrower set of stakeholders and more risk-averse outcomes, often precluding the very types of business investments that are most likely to have transformative benefits for communities.

To realize Congressional intent and preserve these key characteristics in practice will require regulatory clarity and simplicity. Congress gave Treasury broad authority to craft rules and guidance to ensure the benefit works in practice as intended. We urge you to use the full extent of that authority in establishing a guidance timeline and framework that will be attractive to investors and beneficial for communities.

Attached are a number of technical comments and recommendations we believe will be useful in accomplishing the objectives noted above. These materials incorporate input from dozens of experienced stakeholders from a diverse set of backgrounds united in a common desire to see Opportunity Zones succeed in boosting economic opportunity throughout the country. While by no means exhaustive in scope, we focused these comments on implementation issues we believe to be among the most fundamentally important to both the early creation of an Opportunity Fund ecosystem and the long-term success of Opportunity Zones communities.

We appreciate your leadership and look forward to working with you throughout the implementation process.

Sincerely,

Access Ventures
Advantage Capital
Alliant Strategic Impact Housing Funds
Arctaris Impact Fund
Balch & Bingham, LLP
California Forward
Calvert Impact Capital
Capalino + Company
Capital Impact Partners
Chicago Community Loan Fund
CohnReznick LLP
Community Development Bankers Association
Community Development Venture Capital Alliance
Community Reinvestment Fund, USA
Detroit Opportunity Fund
Economic Innovation Group
EJF Capital
Fund for Our Economic Future
Greenberg Traurig, LLP
High Ridge Venture Partners
International Franchise Association
Key Bank
Kirkland & Ellis LLP
Launch NY, Inc.
Launch Tennessee
Local Initiatives Support Corporation (LISC)
National Development Council
Newark Venture Partners
Novogradac & Co./Novogradac Consulting LLP
Opportunity Finance Network
Peachtree Providence Partners
Plante Moran, PLLC
Polsinelli PC
The Rural Community Assistance Partnership
Redbrick LMD
Reinvestment Fund
Rural Opportunity Initiative at Georgetown University McDonough School of Business
Sorenson Impact Center
Sorenson Impact Foundation
Stonehenge Capital Company, LLC
The Enterprise Center
The Pelican Groups
Urban Atlantic
Virtua Capital Management
War Horse Cities
Weller Development Company

Enclosure:
Opportunity Zones Coalition Guidance Request: Discussion and Requested Guidance
Attachment 1: Clarifying Guidance for Qualified Opportunity Funds (“QOFs”) and Qualified Opportunity Zones (“QOZs”)
Attachment 2: Suggested Regulatory Provisions Under § 1400Z-2(d)

cc:
Scott Dinwiddie, Associate Chief Counsel, Income Tax & Accounting, Internal Revenue Service
Dan Kowalski, Counselor to the Secretary, Department of the Treasury
Sunita Lough, Project Director, Tax Reform Implementation Office, Internal Revenue Service
Mike Novey, Associate Tax Legislative Counsel, Office of Tax Policy, Department of the Treasury
Thomas West, Tax Legislative Counsel, Office of Tax Policy, Department of the Treasury