The IRS has completed final regulations on Qualified Opportunity Funds and has sent them to the White House for review.

The final set of regulations will merge and clean up the first and second tranches of proposed guidance. The final version is expected to be over 500 pages in length.

The regulations are now under review at the Office of Information and Regulatory Affairs (OIRA), a division of the White House Office of Management and Budget (OMB). OIRA has 30 days to review the regulations. Once approved, the rulemaking will be published by the Office of the Federal Register.

It is unclear if the regulations will be published before the end of 2019. The Novogradac Opportunity Zones Working Group has requested that the regulations be published either before December 21, or not until after the end of the year.

There are a number of sticking points from the first two tranches of proposed regulations — many of which were discussed at the most recent IRS hearing on Qualified Opportunity Funds — that should be clarified in these final regs, including:

• Data collection and reporting, and what Treasury’s limits may be.
• Multi-asset fund exit options, and the discrepancies that exist between tax treatment at the different QOF, QOZB, and QOZBP levels.
• Whether the substantial improvement test can be conducted on an aggregate basis, as opposed to an asset-by-asset basis.
• The treatment of debt-financed distributions.
• The treatment of Section 1231 gains.
• The definition of vacant property.
• How to pair the Opportunity Zone tax incentive with real estate tax credits such as New Markets, Low Income Housing, Renewable Energy, and Historic.

The final regulations from IRS will be issued roughly two years after the creation of the Opportunity Zones tax incentive. Below is a timeline of key dates in Opportunity Zones history:

• December 22, 2017: Opportunity Zones are created as part of the Tax Cuts & Jobs Act of 2017.
• June 14, 2018: Treasury finalizes certification of Opportunity Zones in all 50 states, 5 overseas territories, and the District of Columbia.
• October 19, 2018: The first tranche of proposed regulations is issued by the IRS.
• February 14, 2019: The first IRS public hearing on Qualified Opportunity Funds.
• April 17, 2019: The second tranche of proposed regulations is issued by the IRS.
• July 9, 2019: The second IRS public hearing on Qualified Opportunity Funds.
• December 6, 2019: IRS completes the final set of regulations on Qualified Opportunity Funds and submits them to OIRA for review.
• Late December 2019 or Early January 2020: The final set of regulations on Qualified Opportunity Funds will be published in the Federal Register.