“To amend the Internal Revenue Code of 1986 to establish special rules for capital gains invested in brownfield and superfund sites.”
No CRS summary available for this bill.
This section establishes special income tax rules deferring taxpayers' capital gains from sales or exchanges with unrelated persons if the taxpayer elects to invest an equal amount in a qualified distressed opportunity fund (QDOF) within 180 days. (Thus, the deferred gain—up to the investment amount—is excluded from gross income in the year realized but included in the earlier of the year the QDOF investment is sold or exchanged or the taxable year including December 31, 2033; no elections are permitted after December 31, 2033, or if a prior election applies to the same gain.) The taxpayer's basis in the QDOF investment is initially zero but increases by (1) the amount of gain recognized upon inclusion, (2) 10% of the deferred gain if held at least five years, and (3) an additional 5% (for a total 15% reduction) if held at least seven years. If held at least 10 years and the taxpayer so elects, the basis steps up to fair market value upon sale or exchange (thus permanently excluding post-investment appreciation). A QDOF is a corporation or partnership holding at least 90% of its assets (measured twice yearly) in qualified distressed opportunity zone property acquired after December 31, 2025—specifically, original-issue stock or partnership interests in, or tangible property used in, a qualified distressed opportunity zone business during substantially all of the fund's holding period. (As background, this mechanism is modeled on the expired Opportunity Zone program [former IRC §§1400Z-1, -2], which incentivized private investment in economically distressed communities through similar deferral, basis step-up, and exclusion benefits.)