The Treasury Department and Internal Revenue Service issued detailed proposed regulations on October 19 regarding the new Opportunity Zone tax incentive. The regulations are a major victory for the multifamily industry and adopt numerous recommendations made by NMHC/NAA as part of a letter and meeting with Treasury Department officials.

As previously reported, to make the Opportunity Zones program as effective as possible, NMHC/NAA encouraged the Treasury Department to address a number of issues. These included ensuring that:

  • Multifamily housing is a qualified investment for Opportunity Funds. The regulations do not limit investment in multifamily housing.
  • Multifamily properties receiving other tax benefits, including Low-Income Housing Tax Credits, Historic Tax Credits and New Markets Tax Credits, that are necessary to make a development viable are qualified investments for Opportunity Funds. The regulations do not limit the use of other tax incentives in conjunction with Opportunity Funds.
  • Properties of all sizes can receive Opportunity Fund financing. The regulations do not limit the size of a property that may receive financing.
  • Opportunity Funds have sufficient time to deploy capital. The regulations provide a working capital safe harbor of up to 31 months to deploy capital so long as a taxpayer maintains a written development plan.
  • Investors can exit Opportunity Fund investments after 2028 -- when Opportunity Zones lose their designation -- and continue to qualify for a capital gains exclusion. The regulations clarify that investments into an Opportunity Fund any time after a qualified Opportunity Fund is designated will qualify for the tax exclusion so long as the investment is held for at least 10 years and disposed of prior to 2048.
  • Investors can improve properties financed through Opportunity Funds with non-capital gains dollars. While only capital gains are eligible for Opportunity Zone tax benefits, the proposed regulations allow Opportunity Funds to utilize other funds so long as they are accounted for separately.
  • LLCs and REITs can set up Opportunity Funds. Taxpayers that are organized as a corporation or partnership, including LLCs, may self-certify as an Opportunity Fund.
  • Investments in existing properties are better able to use the incentive. To invest in existing property, Opportunity Funds must double the basis of acquired property within 30 months. This can be a high threshold in certain circumstances, and Treasury has addressed this issue by excluding land from the calculation of basis.

NMHC/NAA welcome member comments regarding the proposed regulations. For more information on submitting comments, please contact Matthew Berger at

Background on Opportunity Zones

Opportunity Zones are designed to provide tax incentives for investments in distressed communities. Under the new program, Governors have designated approximately 8,800 qualified low-income census tracts nationwide as Opportunity Zones.

Real estate developers and others may establish Opportunity Funds that will be eligible for two tax incentives:

First, taxpayers may defer capital gains that are reinvested in Opportunity Funds to the earlier of the date an investment in an Opportunity Fund is disposed of or December 31, 2026. Notably, gains deferred for five years are eligible for a 10 percent basis step up, while gains deferred for seven years are eligible for an additional five percent basis step up.

Second, post-acquisition capital gains on investments held in Opportunity Funds for at least 10 years may be permanently excluded from income.

For more information on Opportunity Zones, please visit NMHC’s Opportunity Zones advocacy page.