Nearly three months after the Treasury Department released a second round of guidance on the Qualified Opportunity Fund (QOF) regime enacted by the Tax Cuts and Jobs Act, vital questions remain unanswered. In an effort to help resolve these questions, the Internal Revenue Service (IRS) invited commenters to attend a public hearing on proposed regulations related to investing in qualified opportunity funds.
Held on July 9, 2019, in Lanham, Maryland, the hearing included testimony from 19 speakers – including Jackson Walker senior counsel Argyrios C. Saccopoulos, who spoke on behalf of the State Bar of Texas Tax Section. During his testimony, Argyrios covered the following topics:
- Issues with the proposed regulations’ approach to multi-asset QOFs and methods that could be used to create more parity between “inside” and “outside” exit strategies
- Issues with the treatment of carried interest in QOFs and why the regulations should be modified to better protect capital gain rollovers by sponsors
- Issues with the holding period requirements for qualified opportunity zone businesses
- Ways to clarify the active trade or business requirements with respect to property leasing
“To have been selected to represent the State Bar of Texas Tax Section at the hearing was an honor, and I am grateful to have witnessed firsthand the Treasury Department’s interest in improving these regulations,” Argyrios said.
“I am grateful to have witnessed firsthand the Treasury Department’s interest in improving these regulations.”
Prior to testifying at the hearing, Argyrios helped draft the State Bar’s comments regarding the latest round of proposed regulations. For a look at the comments, view the public comment letter submitted by the State Bar of Texas Tax Section, which addresses the six-month rule, Section 1231 gains, the 31-month working capital safe harbor, intangible property, the triple-net-lease definition, the “placed in service rule,” the 90% holding period requirement, the allocation percentage for profits interests, and rules for Section 1400Z-2(c) gain.
In addition to Argyrios’ role in reviewing the comments and including substantive suggestions, Jackson Walker partner Nathan T. Smithson, who co-chairs the Partnership and Real Estate Tax Committee for the State Bar of Texas Tax Section, served as a principal organizer of the public comment letter.
A recap of the July 9 IRS hearing was included in an episode of Opportunity Zones Database’s “Opportunity Zones Podcast” hosted by Jimmy Atkinson.
For the full transcript of the hearing, click here or visit the transcript published in Tax Notes Today Federal. In addition, more information on the hearing can be found on Bisnow’s “Multi-Asset Funds, Aggregating, Gentrification And Abuse: IRS Still Has A Lot On Its OZ Regs Plate.”
For further insights from Jackson Walker regarding QOZs and QOFs, view the following:
- “Brian Dethrow Analyzes Tax Benefits of Qualified Opportunity Zones” (July 30, 2018)
- “‘Dallas News’ Quotes Brian Dethrow on Tax-Backed Projects in Qualified Opportunity Zones” (October 2, 2018)
- “Treasury Releases Qualified Opportunity Fund (QOF) Guidance” (October 25, 2018)
- “Treasury Releases Additional Qualified Opportunity Zone Guidance” (April 26, 2019)
- “‘Houston Chronicle’ Features John Ransom Explaining Qualified Opportunity Zones in “Looped In” Podcast” (May 16, 2019)
Argyrios C. Saccopoulos regularly represents buyers, sellers, and joint venture partners in M&A and real estate transactions, including federal income tax considerations of debt financings, merger agreements, and dealings in stock, partnership interests, and blocker structures. Argyrios has extensive experience counseling fund sponsors and investors on federal income tax aspects of fund formations and investments. Argyrios advises clients on the formation, qualification, and operations of real estate investment trusts, including their use in captive fund structures, and has previously advised some of the largest publicly listed REITs in the United States in REIT compliance matters. Additionally, Argyrios advises clients endeavoring to qualify for the new “qualified opportunity zone” tax incentive structures implemented as part of the Tax Cuts and Jobs Act.
Nathan T. Smithson is a transactional tax attorney with a focus on federal income tax planning for corporations, partnerships, and limited liability companies. In his practice, Nate counsels some of the largest businesses in the country on tax planning, helping them derive the most advantageous strategies possible. Nate has worked closely with clients to revisit their tax structures following the enactment of the Tax Cuts and Jobs Act and to revise partnerships and LLC agreements to reflect the newly effective partnership audit rules. Nate is also frequently engaged to structure executive compensation arrangements for clients, with a specific focus on drafting and negotiating partnership equity and phantom equity compensation plans.