June
28
, 2018
The Honorable David
J.
Kautter
The Honorable William M. Paul
Assistant Secretary of Tax Policy
Chief Counsel (Acting)
U.S. Department of Treasury
Internal Revenue Service
1500 Pennsylvania Avenue, NW
1111
Constitution
Avenue, NW
Washington,
DC
20220
Washington, DC 20224
R
e
: Guidance
R
ega
rding Opportunity Zones under Section
1400Z

2
Dear Assistant Secretary Kautter
and Chief Counsel Paul
:
On behalf of The Real Estate Roundtable, I am pleased to provide
comments regarding the recently authori
zed Opportuni
ty Zone tax incentive
program.
We believe the new tax incentives available for qualifying
Opportunity Zone investments
offer a potentially powerful incentive to
channel long

term investment in low

income communities throughout the
country, th
us spurring job crea
tion and economic development.
Moreover,
since real estate development and redevelopment is a key component of any
region’s economic strength and growth, we strongly view real estate
investment activities as a major aspect of successfu
lly implementing the
Opportunity Zone program.
Qualified Opportunity Fund
C
ertification
P
rocess
Under the
Tax Cuts and Jobs Act
,
1
a
Qualified Opportunity Fund (QOF)
is an investment vehicle, structured as a corporation or a partnership,
organized for the
purpose of investing in Qual
i
fied Opportunity Zone
Property.
As noted in the
Frequently Asked Questions document released
by the Internal Revenue Service (IRS) in April
(
updated as of June 7, 2018)
,
in order t
o become a
QOF
, an eligible taxpayer self cert
ifies by completing
a form and attaching the form to the taxpayer’s federal income tax return.
No approval or action by the IRS is
required.
1
Formally entitled
A
n
Act to P
rovide for
R
econciliation
P
ursuant to
T
itles II and V
of the
C
oncurrent
R
esolution on the
B
udget for
F
iscal
Y
ear 2018
, Pub. L. No. 115

97 (Dec. 22, 2017).
Board of Directors
Chair
Debra A. Cafaro
Chairman
and CEO
Ventas, Inc.
President and CEO
Jeffrey D. DeBoer
Treasurer
Thomas M. Flexner
Vice Chairman and
Global Head
of Real Estate
Citigroup
Secretary
Tim Byrne
President and CEO
Lincoln Property Company
Dr. Thomas R. Arnold
Global Head of Real Estate
Abu Dhabi Investment Authority
Thomas J. Baltimore, Jr.
Chairman, President and CEO
Park Hotels &
Resorts
Chair, Nareit
®
Tray E. Bates, CCIM SIOR CIPS
Principal
Bates Commercial LLC
Former Commercial Committ
ee Chair
National Association of Realtors
®
Jeff T. Blau
CEO
Related Companies
Richard B. Clark
Senior Managing Partner & Chairman
Brookfield Propert
y
Group
John F. Fish
Chairman and CEO
SUFFOLK
Steven Hason
Managing Director, Head of Americas Real
Estate a
nd Infrastructure
APG Asset Management US Inc.
Chairman, Pension Real Estate Association
Anthony E. Malkin
Chairman
and CEO
Empire State Realty Trust
, Inc.
Roy Hilton March
Chief Executive Officer
Eastdil Secured
Kathleen McCarthy
Global Co

Head of Blackst
one Real Estate
Blackstone
Jodie W. McLean
Chief Executive Officer
EDENS
Robert R. Merck
Senior Managing Director and
Head of Real Estate Investments
MetLife
David Neithercut
President and
Chief Executive Officer
Equity Residential
Ross Perot, Jr.
Chairman
Hillwood
Tara
L.
Piurko
Partner
Miller Thomson LLP
President, CREW Network
William C. Rudin
Co

Chairman
and CEO
Rudin Management Company, Inc.
Immediate Past Chair
The Real Estate Roundtable
Rob Speyer
President and
CEO
Tishman Speyer
Barry Sternlicht
Cha
irman and CEO
Starwood Capital Group
Owen D. Thomas
Chief Executive Officer
Boston Properties
June 28, 2018
Page
2
S
ome commentators have suggested that regulators should creat
e a vetting process in which
potential QOFs
are “scr
eened” by the federal government for specific social purposes or objectives
before investments are made and placed.
2
At least one commentator has suggested that Treasury
should impose a specific, quantitative test related to the net impact that an Opportu
nity Zone
investment has on the number of affor
dable housing units in an area.
Treasury should implement the statute consistent with its structure and intent.
Treasury
review of
the organizational documents of a QOF would create an unnecessary “bottleneck
” that
would
delay
economic investment in low

income communities.
In contrast to prior and existing
tax incentive
s for
designated low

income areas
,
Opportunity Zone
s
are
designed to
reach
scale and
facilitate
widespread participation
.
Overly stringent re
quirements related to
QOF
certification or the
placement of investments w
ould
deter and discourage real estate projects that can help transform a
n
economically distressed
area, create employment opportunities for local residents,
and expand the
local tax b
ase.
Only
a simple, streamlined regulatory framework will allow Opportunity Zones to
unlock capital and achieve a
magnitude of investment in
low

income communities that results in
transformational
economic development and job growth.
In a streamlined
fe
deral
process built around self

certification
of
QOFs
and market

driven
investment decisions
,
private capital will flow to its best use while
local authorities will continue to
have ultimate authority over
new projects and developments
.
Deferral or
E
xclus
ion of
C
apital
G
ain
10

year holding period requirement
.
The
Tax Cuts and Jobs Act
provide
s
that a designation as a
Qualified Opportunity Zone (QOZ)
remains in effect for the period beginning on the date of the
designation and ending at the close of the 10
th calendar year beginning on or after such date of
designation. Treasury recently released Notice 2018

48 (June 20, 2018) designating
Opportunity
Zones in
all 50 states, five territories, and the District of Columbia.
In order to avoid any
uncertainty,
Treasury should clarify that
a QOF
investment made in 2019 or later
, held for 10 or
more years, and sold
after December
31
, 2028
qualifies for the
tax
basis increase and exclusion of
gain under section 1400Z

2(c).
Treasury
should
adopt rules similar to th
ose under the new markets
tax credit (NMTC). Under the
NMTC
rules,
an investment can qualify for NMTC benefits as long as
the investment is located in
a census tract
that
qualified at the time the initial investment closed

i.e
.,
at the time the community
development entity distributes the cash proceeds from the qualified
investment to the qualified business. See,
CDFI Fund Frequently Asked Questions, Updated 2017,
Question 24
.
2
The new markets tax credit (NMTC), which provides a larger tax benefit in the form of a tax credit to
prospective investors t
han the incentives in the Opportunity Zone program, includes specific statutory rules
regarding the purpose of the investing entity.
T
he qualifying investment vehicle

a community development
entity

must
have a primary mission of serving or providing
investment capital for low

income communities
or low

income persons, maintain accountability to the community, and
must be certified by
the
Treasury
Secretary
.
The investor requirements, combined with the annual limit on allocated credits, necessarily
con
strains the scope and impact of the NMTC program.
No similar rules or requirements were included in the
Opportunity Zone legislation.