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Business Tax

IRS designates two additional Puerto Rico tracts as qualified opportunity zones

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

Notice 2019-42, 2019-29 IRB

In a Notice, IRS has designated two additional census tracts in Puerto Rico as qualified opportunity zones (QOZs).

Background. Code Sec. 1400Z-1, as recently added by the Tax Cuts and Jobs Act (TCJA; P.L. 115-97; 12/22/2017), allows for the designation of certain low-income community population census tracts as QOZs eligible for a number of favorable tax rules aimed at encouraging economic growth and investment to businesses within the zone. In general, a population census tract that is a low-income community is designated as a QOZ if the chief executive officer of the State in which the tract is located timely nominates the tract for designation as such and notifies IRS in writing of the nomination, and IRS certifies the nomination and designates the tract as a QOZ beyond the end of the “consideration period.” (Code Sec. 1400Z-1(b))

Code Sec. 1400Z-2 provides temporary deferral of inclusion in gross income for capital gains reinvested in a qualified opportunity fund (QOF) and the permanent exclusion of capital gains from the sale or exchange of an investment in the QOF.

A QOF is, generally, an investment vehicle organized as a corporation or a partnership for the purpose of investing in QOZ property (other than another QOF) that holds at least 90% of its assets in QOZ property.

QOZ property includes: any QOZ stock, any QOZ partnership interest, and any QOZ business property.

In Notice 2018-48, 2018-28 IRB, IRS issued a list of all population census tracts that the Department of Treasury designated as QOZs for purposes of Code Sec. 1400Z-1 and Code Sec. 1400Z-2.

IRS announces two additional census tracts.  Two additional census tracts that are low-income communities in Puerto Rico are deemed to be certified and designated as QOZs. The two tracts are added to the list of population census tracts, effective on December 22, 2017.

References: For qualified opportunity zones, see FTC 2d/FIN ¶I-8820United States Tax Reporter ¶14,00Z-14.

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