Opportunity Zone Reporting and Reform Act

II 116TH CONGRESS 1ST SESSION S. 2787 To amend the Internal Revenue Code of 1986 to require reporting for quali- fied opportunity funds, to make modifications to opportunity zones, and for other purposes. IN THE SENATE OF THE UNITED STATES NOVEMBER 6, 2019 Mr. WYDEN introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to require reporting for qualified opportunity funds, to make modi- fications to opportunity zones, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Opportunity Zone Re- 4 porting and Reform Act’’. 5 SEC. 2. INFORMATION REPORTING ON QUALIFIED OPPOR- 6 TUNITY FUNDS. 7 (a) IN GENERAL.— 8 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 2 •S 2787 IS (1) FILING REQUIREMENTS FOR FUNDS AND 1 INVESTORS.—Subpart A of part III of subchapter A 2 of chapter 61 of the Internal Revenue Code of 1986 3 is amended by inserting after section 6039J the fol- 4 lowing new sections: 5 ‘‘SEC. 6039K. RETURNS WITH RESPECT TO QUALIFIED OP- 6 PORTUNITY FUNDS. 7 ‘‘(a) IN GENERAL.—Every qualified opportunity fund 8 shall file an annual return (at such time and in such man- 9 ner as the Secretary may prescribe) containing the infor- 10 mation described in subsection (b). 11 ‘‘(b) INFORMATION FROM FUNDS.—The information 12 described in this subsection is— 13 ‘‘(1) the name, address, and taxpayer identifica- 14 tion number of the qualified opportunity fund and 15 the uniform resource locator (URL) for the website 16 for such fund, 17 ‘‘(2) the value of all property held by the fund 18 as of each date described in section 1400Z–2(d)(1), 19 ‘‘(3) the value of— 20 ‘‘(A) qualified opportunity zone stock held 21 by the fund on each such date, 22 ‘‘(B) qualified opportunity zone partner- 23 ship interests held by the fund on each such 24 date, 25 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 3 •S 2787 IS ‘‘(C) qualified opportunity zone business 1 property held by the fund on each such date, 2 ‘‘(D) tangible property not described in 3 subparagraphs (A), (B), or (C) and held by the 4 fund on each such date, and 5 ‘‘(E) intangible property (including cash 6 and cash equivalents) not described in subpara- 7 graphs (A), (B), or (C) and held by the fund 8 on each such date, 9 ‘‘(4) the name, address, and taxpayer identifica- 10 tion number of— 11 ‘‘(A) each corporation in which the quali- 12 fied opportunity fund owns stock, and 13 ‘‘(B) each partnership in which the quali- 14 fied opportunity fund owns a capital or profits 15 interest, 16 ‘‘(5) with respect to each qualified opportunity 17 zone business which is conducted by the qualified 18 opportunity fund, by a corporation in which the 19 qualified opportunity fund owns stock, or by a part- 20 nership in which the qualified opportunity fund owns 21 a capital or profits interest— 22 ‘‘(A) the identity of the entity conducting 23 the qualified opportunity zone business, and 24 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 4 •S 2787 IS ‘‘(B) each North American Industry Clas- 1 sification Code that applies to such trade or 2 business, 3 ‘‘(6) with respect to each qualified opportunity 4 zone business which is conducted by the qualified 5 opportunity fund or by a corporation or partnership 6 controlled by the qualified opportunity fund— 7 ‘‘(A) the value (as of each date described 8 in section 1400Z–2(d)(1)) of— 9 ‘‘(i) the tangible property of such 10 business, and 11 ‘‘(ii) the intangible property (including 12 cash and cash equivalents) of such busi- 13 ness, and 14 ‘‘(B) the average monthly number of full- 15 time equivalent employees of such business dur- 16 ing the reporting period, 17 ‘‘(7) with respect to each qualified opportunity 18 zone business property held by the fund or by a cor- 19 poration or partnership controlled by the qualified 20 opportunity fund— 21 ‘‘(A) the qualified opportunity zone with 22 respect to the property, 23 ‘‘(B) the date the property was acquired, 24 and 25 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 5 •S 2787 IS ‘‘(C) in the case of real property— 1 ‘‘(i) the square footage of such prop- 2 erty, 3 ‘‘(ii) the number (if any) of residential 4 units on the property, and 5 ‘‘(iii) the aggregate costs incurred 6 with respect to such property related to— 7 ‘‘(I) land acquisition, 8 ‘‘(II) new construction, and 9 ‘‘(III) rehabilitation, 10 ‘‘(8) with respect to each person who has in- 11 vestments in the qualified opportunity fund during 12 the reporting period— 13 ‘‘(A) the name and taxpayer identification 14 number of such person, 15 ‘‘(B) the date or dates on which such in- 16 vestments were made, and 17 ‘‘(C) the total amount of such investments, 18 and 19 ‘‘(9) such other information as the Secretary 20 may require. 21 ‘‘(c) DEFINITIONS.—For purposes of this section— 22 ‘‘(1) IN GENERAL.—Any term used in this sec- 23 tion which is also used in subchapter Z of chapter 24 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 6 •S 2787 IS 1 shall have the meaning given such term under 1 such subchapter. 2 ‘‘(2) CONTROL.—The term ‘control’ has the 3 meaning given such term under section 954(d)(3). 4 ‘‘(3) FULL-TIME EQUIVALENT EMPLOYEES.— 5 The term ‘full-time equivalent employees’ means, 6 with respect to any month, the sum of— 7 ‘‘(A) the number of full-time employees (as 8 defined in section 4980H(c)(4)) for the month, 9 plus 10 ‘‘(B) the number of employees determined 11 (under rules similar to the rules of section 12 4980H(c)(2)(E)) by dividing the aggregate 13 number of hours of service of employees who 14 are not full-time employees for the month by 15 120. 16 ‘‘SEC. 6039L. INFORMATION ON PERSONS INVESTING IN 17 QUALIFIED OPPORTUNITY FUNDS. 18 ‘‘(a) IN GENERAL.—Every taxpayer who makes an 19 investment in a qualified opportunity fund shall provide 20 an annual statement (at such time and in such manner 21 as the Secretary may prescribe) containing the informa- 22 tion described in subsection (b). 23 ‘‘(b) INFORMATION FROM INVESTORS.—The infor- 24 mation described in this subsection is— 25 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 7 •S 2787 IS ‘‘(1) the name, address, and taxpayer identifica- 1 tion number of the taxpayer, 2 ‘‘(2) the name and taxpayer identification num- 3 ber of the qualified opportunity fund in which the 4 investment was made, 5 ‘‘(3) the date such investment was made in a 6 qualified opportunity fund and the amount of such 7 investment, including a separate statement of the 8 amount of any such investments which are gain for 9 which an election was made under section 1400Z– 10 2(a)(1), 11 ‘‘(4) the date of the disposition of the invest- 12 ment, and 13 ‘‘(5) such other information as the Secretary 14 may require. 15 ‘‘(c) DEFINITIONS.—Any term used in this section 16 which is also used in subchapter Z of chapter 1 shall have 17 the meaning given such term under such subchapter.’’. 18 (2) PENALTIES.—Part II of subchapter B of 19 chapter 68 of the Internal Revenue Code of 1986 is 20 amended by inserting after section 6725 the fol- 21 lowing new section: 22 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 8 •S 2787 IS ‘‘SEC. 6726. FAILURE TO COMPLY WITH INFORMATION RE- 1 PORTING REQUIREMENTS RELATING TO 2 QUALIFIED OPPORTUNITY FUNDS. 3 ‘‘(a) IN GENERAL.—If— 4 ‘‘(1) any person is required to file a return 5 under section 6039K or a statement under section 6 6039L for any period, and 7 ‘‘(2) fails— 8 ‘‘(A) to file such return or statement on or 9 before the required filing date, or 10 ‘‘(B) fails to include all of the information 11 required to be shown on the return or state- 12 ment or includes incorrect information, 13 such person shall pay a penalty of $10,000. 14 ‘‘(b) REDUCTION WHERE CORRECTION IN SPECIFIED 15 PERIOD.—If any failure described in subsection (a)(2) is 16 corrected on or before the day 30 days after the required 17 filing date, the penalty imposed by subsection (a) shall be 18 $250 in lieu of the amount determined under such para- 19 graph. 20 ‘‘(c) DE MINIMIS ERRORS.—If— 21 ‘‘(1) there are 1 or more such failures described 22 in subsection (a)(2)(B) relating to an incorrect dol- 23 lar amount, and 24 ‘‘(2) no single amount in error differs from the 25 correct amount by more than $25, 26 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 9 •S 2787 IS then no correction shall be required, and, for purposes of 1 this section, such return or statement shall be treated as 2 having been filed with all correct required information. 3 ‘‘(d) PENALTY IN CASES OF INTENTIONAL DIS- 4 REGARD.—If 1 or more failures described in subsection 5 (a)(2) are due to intentional disregard of the filing re- 6 quirement (or the correct information reporting require- 7 ment), then, with respect to each such failure— 8 ‘‘(1) subsections (b) and (c) shall not apply, 9 and 10 ‘‘(2) the amount of the penalty determined 11 under subsection (a) shall be twice the amount 12 which would be determined without regard to this 13 paragraph. 14 ‘‘(e) INFLATION ADJUSTMENT.— 15 ‘‘(1) IN GENERAL.—In the case of any failure 16 relating to a return or statement required to be filed 17 in a calendar year beginning after 2020, each of the 18 dollar amounts in subsections (a) and (b) shall be 19 increased by an amount equal to such dollar amount 20 multiplied by the cost-of-living adjustment deter- 21 mined under section 1(f)(3) for the calendar year 22 determined by substituting ‘calendar year 2019’ for 23 ‘calendar year 2016’ in subparagraph (A)(ii) thereof. 24 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 10 •S 2787 IS ‘‘(2) ROUNDING.—The amount of any increase 1 under paragraph (1) shall be rounded to the nearest 2 multiple of $100 ($10 in the case of any increase in 3 the amount under subsection (b)).’’. 4 (3) CLERICAL AMENDMENTS.— 5 (A) The table of sections for subpart A of 6 part III of subchapter A of chapter 61 of such 7 Code is amended by inserting after the item re- 8 lating to section 6039J the following new items: 9 ‘‘Sec. 6039K. Returns with respect to qualified opportunity funds. ‘‘Sec. 6039L. Information on persons investing in qualified opportunity funds.’’. (B) The table of sections for part II of 10 subchapter B of chapter 68 of such Code is 11 amended by inserting after the item relating to 12 section 6725 the following new item: 13 ‘‘Sec. 6726. Failure to comply with information reporting requirements relating to qualified opportunity funds.’’. (b) INFORMATION RETURNS OF QUALIFIED OPPOR- 14 TUNITY FUNDS MADE PUBLIC.— 15 (1) REQUIREMENT TO DISCLOSE.—Subchapter 16 B of chapter 61 of the Internal Revenue Code of 17 1986 is amended by inserting after section 6104 the 18 following new section: 19 ‘‘SEC. 6104A. PUBLICITY OF INFORMATION REQUIRED 20 FROM QUALIFIED OPPORTUNITY FUNDS. 21 ‘‘(a) IN GENERAL.—Each qualified opportunity fund 22 shall make publicly available on the website specified in 23 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 11 •S 2787 IS section 6039K(b)(1) a copy of each information return 1 filed under section 6039K(a) at all times during the 3- 2 year period beginning on the last day prescribed for filing 3 the return (determined with regard to any extension of 4 time for filing). 5 ‘‘(b) EXCEPTIONS FROM DISCLOSURE REQUIRE- 6 MENT.—The information made public under subsection 7 (a) shall not include— 8 ‘‘(1) any taxpayer identification number in- 9 cluded on the return, 10 ‘‘(2) the information described in paragraph (8) 11 of section 6039K(b), and 12 ‘‘(3) such other information as identified by the 13 Secretary to the extent the exclusion of such infor- 14 mation is consistent with the purposes of this sec- 15 tion. 16 ‘‘(c) QUALIFIED OPPORTUNITY FUND.—For pur- 17 poses of this section, the term ‘qualified opportunity fund’ 18 means a fund described in section 1400Z–2(d).’’. 19 (2) PENALTY.— 20 (A) IN GENERAL.—Section 6685 of such 21 Code is amended— 22 (i) by inserting ‘‘or the requirements 23 of section 6104A’’ after ‘‘section 6104’’, 24 and 25 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 12 •S 2787 IS (ii) by striking ‘‘FOR CERTAIN TAX- 1 EXEMPT ORGANIZATIONS’’ in the head- 2 ing thereof. 3 (B) CONFORMING AMENDMENT.—The item 4 relating to section 6685 in the table of sections 5 for part I of subchapter B of chapter 68 of 6 such Code is amended by striking ‘‘for certain 7 tax-exempt organizations’’. 8 (3) CLERICAL AMENDMENT.—The table of sec- 9 tions for subchapter B of chapter 61 of such Code 10 is amended by inserting after the item relating to 11 section 6104 the following new item: 12 ‘‘Sec. 6104A. Publicity of information required from qualified opportunity funds.’’. (c) EFFECTIVE DATE.—The amendments made by 13 this section shall apply to taxable years beginning after 14 the date of the enactment of this Act. 15 SEC. 3. MODIFICATION OF TRACTS QUALIFIED TO BE DES- 16 IGNATED AS QUALIFIED OPPORTUNITY 17 ZONES. 18 (a) DISQUALIFICATION OF CERTAIN CENSUS 19 TRACTS.— 20 (1) CENSUS TRACTS WITH HIGH MEDIAN FAM- 21 ILY INCOME.—Paragraph (1) of section 1400Z–1(c) 22 is amended to read as follows: 23 ‘‘(1) LOW-INCOME COMMUNITIES.— 24 VerDate Sep 11 2014 03:16 Nov 13, 2019 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S2787.IS S2787 kjohnson on DSK79L0C42 with BILLS 13 •S 2787 IS ‘‘(A) IN GENERAL.—Except as provided in 1 subparagraph (B), the term ‘low-income com- 2 munity’ has the same meaning as when used in 3 section 45D(e). 4 ‘‘(B) EXCEPTION.— 5 ‘‘(i) IN GENERAL.—Such term shall 6 not include any census tract if the median 7 family [Text truncated for display. 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