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
Pennsylvania Avenue, NW
Washington, DC 20220
August 23
, 2018
Acting Commissioner Kautter,
As the nation’s mayors, we write to encourage the issuance of timely and effective
IRS guidance for the implementation of Opportunity Zone provisions
in the
Tax Cuts
and Jobs
of 2017
. As mayors we believe such guidance is
essential to the successful formation of funds and deployment of investments
consistent with the purposes of the Act, to encourage a broad array of private
n communities with low

income residents.
We stand together as a diverse and bipartisan group of mayors representing
thousands of Opportunity Zones and millions of Opportunity Zone res
idents who
would like to convey the excitement
our constituent
s and comm
unities have for
promising new policy. Investors, entrepreneurs, and local leaders are activated and
already putting business and community plans in place in response
to Congress’ and
the Administration’s commitments to implement the Opportunity Zone
However, we are keenly aware that the success of this policy depends on timely and
effective guidelines from the Department of the Treasury and the Internal Revenue
Service, especially in light of the timelines in the statute. We worry that abse
timely and effective guidance that encourages broad investor participation in funds
that can assemble diversified portfolios, the economic outcomes Congress and the
Administration envisioned will not be achieved. Rules need to be written with the
cal needs of businesses and fund managers in mind. The expectations of our
constituents and communities are high but wholly appropriate given the clear intent
of Congress and the basic princ
iples underlying this new
We ask you and the Secretary
to take the following into consideration:
The need for rules attuned to Opportunity Funds making portfolio investments into
new and existing businesses.
Mayors all across this country took to heart the words that Senator Tim Scott, lead co

sponsor of
underlying legislation that created Opportunity Zones, wrote in a February op

ed in
this year:

Under the provisions
in exchange for a lower capital gains rate that decreases based on
the length of the investment, investors can put those unuse
d dollars to work in a
meaningful and productive way that will grow jobs, inspire entrepreneurship, and improve
the local economy.

All stakeholders involved in this piece of legislation have been clear that opportunity and
entrepreneurship are inseparable, and that this new provision of the tax code was intended to
unlock capital for businesses seeking to take root and grow in communi
ties that for too long have
known only disinvestment and decline.
Mayors are deeply attuned to the need to boost business
formation and expansion in low

income areas, and we believe therein lies the most exciting
promise of the Opportunity Zones policy
n short, in order to be successful and deliver on its promises, Opportunity Zones must be a
useable tool to finance, launch, and scale new business enterprises. In that spirit, we generally
concur with the technical recommendations submitted by the Opportu
nity Zone Coalition led by
the Economic Innovation Group in its June 18 comments to you.
Specifically, if the “substantially all” tests for Qualified Opportunity Zones (QOZ) business and
property are too high, we are concerned Qualified Opportunity Fund
(QOF) investment in small
and medium

sized business will be curtailed, thereby undermining the core goal and potential of
this new policy. We concur with previous commenters that a 70% “substantially all” test is
necessary. For existing businesses, the “
substantially all” use test should not be required for
previous business a
ctivity or acquired property.
To that end, the
holding period for QOZ business
property for small businesses should be treated as starting on the first day of the first taxable year
starting after December 31, 2017. Again, we concur with the comments of the OZ coalition.
The need for Opportunity Funds to be given sufficient time to assemble meaningful
investment portfolios.
We also believe that QOFs should be given adequate start
up time in order to work with cities to
identify projects that have the most impact in providing economic opportunity to low income
residents. This is particularly true for QOFs that are formed to invest in zones with high
concentrations of poverty and h
istoric patterns of dis

investment where even with the added
incentives offered by Opportunity Zones, investors face high hurdles. Cities are currently
developing investment projects and strategies to present to QOFs for potential investment into
such com
munities. We are committed to using our resources to unlock private capital for these
places as well, but such a development process
requires sufficient lead time.
We concur with