OZ Pitch Day - Mar 6, 2025
Will Trump Save Opportunity Zones In 2025?
Opportunity Zones are in danger of ending. Will President Trump save them in 2025?
In this webinar, Jimmy Atkinson details how Congress and President Trump will work together to both extend and renew the Opportunity Zone tax incentive in 2025… before it’s too late, including eight new ideas that are being considered to improve the OZ legislation.
Episode Highlights
- How the 2024 election results, with Trump and a Republican-controlled Congress, set the stage for Opportunity Zones reform in 2025.
- Legislative proposals, including OZ 1.5 (a two-year program extension with stricter reporting requirements and census tract updates) and OZ 2.0 (a full program renewal, with enhanced flexibility and stricter qualifying criteria).
- Potential reforms that will improve Opportunity Zones, including rolling deferral periods, allowing after-tax investments, and incentives for affordable housing and job creation.
- How Opportunity Zone legislation will fit into a broader Republican tax agenda.
- Speculated timeline of tax legislation and a rollout of OZ 2.0.
- An overview of OZ Insiders, for those who want to stay in the know on the latest Opportunity Zone trends.
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About The Opportunity Zones Podcast
Hosted by OpportunityZones.com founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.
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Show Transcript
Welcome to today’s OpportunityZones.com webinar. This is “The Future Of Opportunity Zones.” Will we see an extension in 2025? I’m your host, Jimmy Atkinson. I’ll be presenting today’s live webinar. Today is November 21st, 2024. The facts are rapidly changing. We just got out of an election just a little over two weeks ago. And if you’re watching a recording of this or listening to a recording of this, weeks or months later, a lot of stuff may have changed. As always, check OpportunityZones.com for the latest. A quick legal disclaimer, this is not meant to be tax advice or investment advice, so please consult your advisors before making any investment decisions
A little bit about me, before we really dive in. I am the founder of OpportunityZones.com. We founded our organization, formerly known as OpportunityDB, in 2018. We’re the number one source of news and information for Opportunity Zone investors and operators all throughout the country. I’m also host of “The Opportunity Zones Podcast.” I’ve hosted over 300 episodes of that show, and I founded an Opportunity Zones mastermind group, OZ Insiders, in 2023. I’m gonna be talking to you a little bit about that OZ Insiders group a little bit later in today’s presentation. A lot of what you’re gonna see here during this presentation is information that I’ve gleaned from working with OZ Insiders over the past several weeks and months, and even years, I should say. And this type of presentation that I’m doing today is quite common, what we do inside of OZ Insiders, on a monthly basis. I’ll tell you more about how to join OZ Insiders, if you’re not already a member, toward the end of today’s presentation. I’ve also personally worked with over 100 Opportunity Zone GPs and other operators over the years. Quite a bit of experience in the space, working in it for six-plus years now.
The election results came in a little over two weeks ago. We have already had a lot of coverage of what the election may mean for Opportunity Zones. I personally feel like this is a very exciting time to be in the Opportunity Zones industry, given the results of the election, given President Trump’s very vocal support of Opportunity Zones, and the fact that he’ll be working with a Republican trifecta, control of the White House and both chambers of Congress, starting in 2025. So, here’s some of the coverage that we’ve given to this so far to date. I was able to do two interviews at the Novogradac Conference a couple weeks ago, one with Ashley Tison, one with Mike Novogradac himself. Both of them discussed the election outcome with me. It was very fresh. This was the morning after the election when I recorded both of these podcast episodes. We also did, Andy and I, Andy Hagans and I, just did an “OZ NewsHour” live podcast episode just yesterday afternoon, about 24 hours ago, and we covered the election outcome. This, over here, this bottom right one was a 35-minute panel discussion that I hosted with Catherine Lyons of the Economic Innovation Group and Jill Homan of Javelin 19 Investments. And we discussed how the new Congress and Trump may reshape Opportunity Zones going forward, starting in 2025. And then Emily Lavery joined our private OZ Insiders Mastermind Group. We had our monthly master class, and she was our guest instructor. And she brought in a couple of Capitol Hill insiders, including Shay Hawkins of the Opportunity Funds Association, and Mannar Hanna, a Capitol Hill staffer inside of Senator Tim Scott’s office, to offer their unique insights, as well as Emily’s unique insights, into what Opportunity Zone legislation may look like in 2025.
So, I’ve covered this quite extensively just over the past two weeks. A lot of today’s presentation is informed by these discussions that I’ve had publicly with other members of the Opportunity Zones industry, as well as some private conversations that I’ve had with members of the Novogradac Opportunity Zones Working Group, folks that I had dinner with and conversed with at the Novogradac OZ Summit in Washington, D.C. a couple weeks ago, and other phone calls and emails that I’ve had over the past couple of weeks. But before we get there, I thought it’d be helpful just to take a quick look at the current state of Opportunity Zones. And just before I do that, I do just wanna check in on the chat here. So, everything looks good. Any questions or comments for me, please do use the Q&A tool in the Zoom toolbar, and I’ll try to get to some of those questions either throughout the course of today’s presentation, or I might end up holding them toward the end.
Current state of Opportunity Zones, though. I’ve frequently touted this as the greatest tax incentive ever created, but for how much longer? Right? Because it’s a great tax incentive, but it is perishable. Some of the benefits have already expired. We had the step-up in basis provisions expire at the end of 2019 and 2021. The big benefit, of course, is still out there, tax-free appreciation within the OZ investment, so long as you hold for 10-plus years, and fully comply with all of the requirements of the program. It’s essentially unlimited tax-free growth of your OZ investment. Plus you get a deferral period, although that’s getting shorter and shorter every year. But that 10-year benefit is really still what really drives this program.
But time is running out. If Congress fails to act, a lot of Trump’s Tax Cuts and Jobs Act of 2017 is set to expire after next year and the year after. And Opportunity Zones is one of those tax policies that’s set to expire the year after, at the end of 2026. So, if Congress takes no action, if they don’t pass any tax legislation, either this year or next year, or the year after, Opportunity Zones will cease to exist as we know them. Essentially, you need to trigger a gain prior to the end of 2026 in order to be eligible for investment into Opportunity Zones. So, if you trigger a gain January 1st, 2027 or beyond, under how the tax code is currently written, you can’t do Opportunity Zones anymore after that date.
Here’s a quick look at the timeline. I don’t know how quick it is. It’s actually pretty detailed. But we’ll start at the beginning here. Always a good place to start. Tax Cuts and Jobs Act was enacted on December 22nd, 2017 by President Trump and his Republican Congress. That’s when he signed it into law, was December 22nd, 2017. And that is when Opportunity Zones were born. Opportunity Zones were a six-page portion of a 186-page tax bill, known as the TCJA, I may refer to it as, throughout the course of today’s presentation. And a lot of those provisions are expiring either at the end of next year, 2025, or the end of 2026. We had Opportunity Zones designated in the months that followed, and we had over 8,700 census tracts designated as of July 9th, 2018 is when the Treasury certified all of them. Final regulations were issued by the IRS at the end of 2019. So, a two-year period it took for the Opportunity Zones portion of the TCJA to get fully regulated by the IRS, written regulations. We had, just a few weeks later, the 15% basis step-up expired. A couple years after that, the 10% basis step-up expired.
And so now we’re about, you know, coming into 2022, we’re about halfway through the program already when OZ reform was introduced in the 117th Congress. This went nowhere, unfortunately. So they reintroduced it in the 118th Congress, which is our current session of Congress, which is now entering a lame duck period before the new session gets seated in January of 2025. So, here’s where we are right now. By the way, I’m gonna talk about this reform legislation in a lot more detail in a moment here. This is a very important part of today’s presentation. What’s gonna happen with this OZ reform that didn’t pass in 117, didn’t pass in 118? I think it’s gonna become a big part of the 119th Congress, which will be seated in 2025. As it is currently written today, the OZ deferral date is set in stone as December 31, 2026. Only an act of Congress can change this date, meaning that the last chance for investors to possibly make any sort of investments into QOFs would be mid-year 2027, roughly 180 days past this date. You can potentially get until September 10th or so of 2027 if you recognize a ’26 gain on a partnership schedule K-1. But after that, there’s really no OZ investments that could possibly be made.
Here’s the current map of Opportunity Zones. There’s currently 8,764 census tracts that were designated in 2018 as Opportunity Zones by the Treasury Department. Question is, could we possibly get a new map later this decade? These census tracts will eventually expire, and potentially, next year, tax legislation could introduce a renewal of Opportunity Zones that would bring forth a new map at some point in the years to come. I’ll talk more about that, and I’ll even speculate as to when that might happen, a little bit later on in today’s presentation, so stay tuned. But let’s talk about the election results, and the impact that those results are going to have on tax legislation in 2025. As I mentioned before, the Tax Cuts and Jobs Act is expiring, a lot of the provisions in it are expiring, after 2025. Now, for today’s webinar, we’re really focused pretty much only on the Opportunity Zones portion. But the Opportunity Zones portion on Capitol Hill is really just a small part of this big, bigger puzzle of tax legislation, and without any sort of tax legislation in 2025, this was always going to be a huge priority for the new Congress and the new President, no matter what the balance of power was going to be, no matter if Harris had won the election or if Trump had won the election, no matter if Democrats were in power in Congress or Republicans were in power of Congress. That’s why a lot of Capitol Hill insiders are referring to 2025 as the Super Bowl of Tax.
Without new tax legislation before year end, the tax rate will increase for nearly two-thirds of American households, starting on January 1, 2026. And you do not wanna be an elected official responsible for American families’ taxes going up. That would first be felt on W-2 paychecks coming home mid-January, most likely, of 2026, in most cases, I should say. So, it’s a huge priority for our federal leaders to pass tax legislation in 2025. And the fact that the Republicans have swept the White House, the House, and the Senate makes it much more likely that tax legislation can get pushed through. And in fact, it becomes a huge, huge priority for the Republicans in control in 2025. I would even go as far as to say failure is not an option. Andy and I were talking about this on our podcast episode yesterday, of “OZ NewsHour.” I mentioned failure is absolutely not an option. Tax legislation has to get passed next year. Otherwise, the Republicans are in pretty dire straits, I would say, when it comes to midterm elections in 2026. And then midterm elections come in 2026, a new session of Congress gets seated in ’27, and who knows what that Congress is gonna look like? The Republicans have a chance, right now, over this upcoming year, to pass tax legislation as they wanna pass it, and they don’t need any bipartisan support from Democrats to push through their agenda. They just need to get everybody on the red side of the aisle on board with what they’re going to do.
That said, by the way, Opportunity Zones are supported in broad, bipartisan fashion. I shouldn’t fail to mention that. But the fact of the matter is tax legislation that gets pushed through next year will be very much a partisan effort, by the Republican side. So, we’ll take a look at the 2024 election results. These are the current numbers as of an hour or two ago, when I last checked the AP and their current projections. Trump has won the presidency. That’s been clear for a couple weeks now. In the Senate, the Republicans have won control of the Senate. There is one seat that is still uncalled, in the state of Pennsylvania, and it’s heading to a recount. So we won’t know for a few weeks still if the Republicans have 53 to 47 majority or a 52 to 48 majority. I should mention that the Republican member of Congress who’s in that Pennsylvania race does have a slim lead at this point. But who knows which way that might end up going.
In the House of Representatives, this one was drawn out for a longer period of time. It was just a week ago, actually happened I believe the morning of OZ Pitch Day, last Thursday morning, that the AP officially called this race for the Republican party. They hit that 218-seat threshold, just within the last few hours. They actually just called another election for the Republican party. So, right now, or as of an hour or two ago, when I last pulled this graphic, someone correct me if it’s been updated since then, Republicans have 219 seats and the Democrats have 213 seats, and there’s still three seats that are uncalled. So, the Republicans are gonna have a very slim majority in the House, but a pretty good, decent-sized majority in the Senate. And let’s not forget that JD Vance is the tiebreak vote in the Senate if any bill gets 50-50 support from the Senators.
And I did wanna look at the last two Republican trifectas that we’ve had in the United States. The previous one that we had was during President Trump’s first term in office, during his first two years, the 115th Congress, of 2017 through ’18. He’s gonna have a Republican trifecta again in the 119th Congress, for 2025 through ’26. So, let’s focus on the Senate first. JD Vance was the President of the Senate in the 115th. I’m sorry, Mike, did I say…? I don’t remember what I said. Mike Pence was the President of the Senate in the 115th. JD Vance will be the President of the Senate in the 119th. They’re there to break ties. In this first term of office, Trump had, I forget the number here, I think it was about 52 or so seats, though. These two gray dots are independent members who typically caucused with the Democrats. It was about 52 to 48. And in this session of Congress, it’s gonna look like either 52 to 48 or 53 to 47. So, pretty similar to the last time around.
The House, on the other hand, is much different. Andy and I were discussing yesterday how President Trump is coming into office this time in a much different situation than he came into office eight years ago, in January of 2017. When he won the election in 2016, he lost the popular vote, and he won the swing states that he needed to win by the narrowest of margins. And he came in largely as an outsider. An outsider in his own party, an outsider in Washington. This time’s a lot different. This time, the Republican Party over the last eight years has really been remade in his image. A lot of members of Congress are very supportive of President Trump. I mean, JD Vance is one such member who wasn’t really on Team Trump eight years ago, and now he very much is, obviously. That’s a good case study there. He’s also not coming in as an outsider anymore. And, in this last election, he didn’t win by the slimmest of margins. He won a very decisive victory. He won all seven swing states. He flipped six states from blue to red, and he won the popular vote by probably, when all’s said and done, about a million votes or so. Not an overwhelming landslide victory by any traditional measure, but in terms of Republican wins in presidential elections of the last several decades, it’s pretty decisive compared to some other slimmer victories, by both parties, really.
So, he has a little bit more of a mandate coming into the White House this time than he might have had in 2016 and 2017. That said, you can look and see what the House looked like during his first term, and what it’s going to look like during his second term. He had a much larger margin of majority in the House in 2017 when he started. It was 241 Republican House representatives. You can see this is about the midway point here. Red’s really spilling over there. In this one, it’s about as close to 50-50 as you can get. They have 219 seats currently. They might pick up one or two or three more. There’s three that are undecided. But it’s gonna be a much slimmer majority. And what this means is, when they were passing the TCJA, in 2017, I believe, if I recall correctly, there were 13 Republican House reps that voted against it. They can’t afford that in this 119th Congress. They can’t afford to lose 13 votes. That TCJA was passed along party lines here, in 2017. Likely, any tax legislation, any TCJA 2.0, is also gonna get passed along party lines. It’s gonna be very partisan vote. The OZ portion of it has broad bipartisan support, but the tax bill overall is really gonna need 50% plus one to pass. And that’s probably about what it’s gonna get. So, they can’t afford to lose 13 members of their caucus, in any House vote that takes place next year. They can really only afford to lose one or two, maybe three members of the Republican party.
So, what that means is there may be a lot more holdouts. There may be more people kind of horse trading to get what they want, in any sort of tax legislation bill. And it may not impact the Opportunity Zones provision all that much, if at all. But the Opportunity Zones package has to be part of a much broader tax legislation. And anyways, I just like to point that out, that this isn’t a done deal. There is a chance that they can fail. Failure is not an option, as I mentioned, because they do need to do it now or never, essentially, lest tax rates start going up in 2026. They really wanna get this done before the end of next year. So, that’s a quick look at the Republican trifecta, is the difference between his first term and what his second term is going to end up looking like.
I wanted to talk about some key Republican supporters of Opportunity Zones. By the way, there are a lot of Democratic supporters of Opportunity Zones as well. Senator Cory Booker, from New Jersey, probably being the most important Democratic supporter of Opportunity Zones in the Senate. But tax legislation is going to be a very partisan effort in 2025, and it’s going to be the Republican Party that’s really going to shape it. Fortunately, within the Republican Party, there are numerous high-profile, very important key members of Congress that are huge Opportunity Zone champions. Not to mention, let’s start with President Trump himself. Of all of the community development tools and tax policies that President Trump has at his disposal to revitalize the economy, or to revitalize low-income areas, and to really help out the localities of a lot of his base of supporters, Opportunity Zones are by far his favorite policy. In fact, he brings them up, not every chance he gets, but he brings them up quite a bit. He brought them up on the campaign trail several times during election season, including at the first debate, in June, with Joe Biden, and at the Republican National Convention in the fall. He also had…or was it late summer? I think it was late summer. He also had Senator Tim Scott speak about Opportunity Zones a little bit at the Republican National Convention as well.
Republican Senator Tim Scott from South Carolina, he is possibly the biggest champion of Opportunity Zones in the entire Congress, and certainly in the Senate. He was one of the original co-sponsors of the Investing in Opportunity Act bill, that was first introduced into Congress in 2015, and that’s the bill that eventually made its way into the Tax Cuts and Jobs Act of 2017. Senator Tim Scott, one of the original co-sponsors of that Senate bill. Cory Booker, on the other side of the aisle, was the other co-sponsor, original co-sponsor. Senator Tim Scott’s a really important member of Congress to be so supportive of Opportunity Zones. He’s a member of the Senate Finance Committee. He may become the chairman of the Senate Finance Committee, and if not, I believe he’s gonna be the chairman of the subcommittee on banking. So, a very important committee member, very influential, powerful member of this committee. This is the Senate committee through which any House bill on tax needs to get analyzed first on the Senate side.
All tax bills have to originate in the House, though, so let’s talk about the House for a minute. Republican Jason Smith, Republican from Missouri, he is currently the chairman of the House Ways and Means Committee. It’s very likely, given that the Republicans held a majority in the House, that he’ll be the chairman of the House Ways and Means Committee again in the next session of Congress. He’s been very vocal of Opportunity Zones. He introduced a rural Opportunity Zones bill about a year back or so, and he’s also gone around with Representative Mike Kelly, who’s the chairman of the subcommittee on tax within the House Ways and Means Committee, to Erie, Pennsylvania. They did a big talk about Opportunity Zones over the summer, and Jason Smith shared his enthusiasm and support of Opportunity Zones. And Representative Mike Kelly, if there’s any congressional district in the nation that’s received more attention on Opportunity Zones, and more support of Opportunity Zones than Erie, Pennsylvania, I don’t know what it is. I’m pretty sure Erie, Pennsylvania is, like, the poster child for a successful Opportunity Zone community revitalization. And Representative Mike Kelly is their House rep, in the House of Representatives on Capitol Hill. He’s also the chairman of the subcommittee on tax, so he is also very influential. Any House, any tax legislation has to be introduced through this committee first, which these two very vocal supporters of Opportunity Zones sit on. So, I would say of all the community development tools that are out there that need to be renewed, Opportunity Zones is probably the one that has the most support from the most important people in Congress, and is the one that’s most likely to be included in any new tax legislation next year.
So, let’s talk about what that tax legislation might actually look like. And let me see, I’ve got a question here. Let’s see. Question from Coni. Coni, thanks for the question. I’ll stop for a moment here, take a little break, and I’ll address Coni’s question. So, Coni wants to know, “What happens to the numbers when you take into account the cabinet assignments from the House and Senate? Governor appoints to the Senate. I don’t know whether the governor has to appoint to the same party, but there are a number of assignments from the House. Do they stay in the House until their appointments are confirmed?” Coni, that’s a great question. I don’t 100% know the answer to it. I believe Matt Gaetz resigned from the House when he became the nominee for attorney general. And then, I don’t know if you guys have heard, but just within the last hour or two, he’s withdrawn his name from consideration for that post. And I don’t know what happens to that. If anybody does know, let me know in the chat. I’m not sure if Matt Gaetz can go back or if he’s kinda out of luck now. This all just kinda unfolded within the last hour or two, and I didn’t have time to read too much more about that.
I suspect, Coni, that President Trump is nominating folks from safe districts, and he knows that the new appointments will be friendly to his administration, and will be from the Republican Party. That’s my best guess. I don’t know that for sure. That certainly is a concern, but I haven’t spent a lot of time thinking about that yet. If you know the answer to Coni’s question, if you have any comments about that, please do feel free to express your thoughts in the chat, though. I’d love to hear from others if you have any thoughts on Coni’s question. Great question, Coni, and thanks for being here today.
OZ legislation. So, let’s talk about what we mean by OZ legislation. There’s really two different types of OZ legislation that I think could possibly get pushed through. First of all, there’s extension, but then there’s also renewal and permanence. So, what does it all look like? First of all, let’s talk about, so, there’s two different things we’re talking about here, but, so, one, let’s talk about an Opportunity Zone extension. Sometimes this is referred to as OZ 1.5. If we consider the current program, as formulated in 2017 and administered at the beginning of 2018, as OZ 1.0, OZ version 1, basically, an extension would basically kinda upgrade OZ 1 to OZ 1.5. So, here’s what it would do. And this reform bill has been introduced into Congress in each of the last two sessions, in the current session, 118, and in the previous session, 117. This current bill, that has been sitting in the House since September of last year, so, what, a little over, oh, close to 14 months now, House Resolution 5761, the bipartisan House bill, it has co-sponsors from both sides of the aisle, although I should mention that the vast majority of the co-sponsors are from the Republican Party. The key provisions are, this is really the biggest one here, so I’ll focus the most on this, it’s gonna extend the tax incentive for two years. Essentially, it takes that deferral date of December 31, 2026, that’s written into the Internal Revenue Code, and it just crosses that out and changes it to December 31, 2028. So now, instead of needing to recognize a gain prior to the end of 2026, you have to recognize a gain prior to the end of 2028. And as that gives you into June or possibly even September of 2029 to defer that gain into a Qualified Opportunity Fund. So, it buys this current V1.0, turned into V1.5, just two more years. Two more years of runway.
Some other key provisions in this bill, it would also expand the reporting requirements, require Qualified Opportunity Funds to provide a little bit more data, and it would also decertify certain high-income Opportunity Zone tracts. What I’ve heard is that it would likely decertify roughly 75 to 100 census tracks. So, we’ve got 8,700-plus total Opportunity Zones. About 75 to 100 of them would be nixed. The good news is, if you already invested into a Qualified Opportunity Fund that has deployed capital into one of those zones that gets decertified or eliminated from this V1.0, you’re grandfathered in. So, you’re not gonna get railroaded by that. So don’t worry about that. It’s just not gonna allow new deployment of capital into those zones. It would also allow for feeder funds, essentially a fund of funds concept. Currently, a Qualified Opportunity Fund is not able to invest directly into another Qualified Opportunity Fund. This would just change that, and make it easier for capital to flow.
I ran a survey over the summer. A lot of you may have taken this survey, and I just released a report on it within the last few weeks, and I presented my findings to the Novogradac OZ Summit two weeks ago. Seventy-six percent of Opportunity Zone investors say that they would be more likely to make an Opportunity Zone investment if this legislation gets enacted. If OZs get extended by an additional two years, it makes about three-fourths of OZ investors more likely to make a new Opportunity Zone investment in the 12 months following enactment, which I thought was pretty interesting. I would expect that if this type of extension bill gets passed and enacted, that we’ll see quite a bit of investment activity as a result of it. So, that’s OZ extension. Taking the current program, making it a little bit better here and there, modernizing it, and extending out that due date, essentially, that deadline, that sunset date, by two years. So, that would be great for the industry.
But the one I’m really excited about is this Opportunity Zones renewal, the OZ 2.0. And before I get to that, I did just wanna read this comment from Jeff Johnson. So, Jeff says, “I believe that Ron DeSantis gets to name a temporary Republican replacement until a new election can happen in Florida, but will defer to someone more knowing essentially.” Well, Jeff, I appreciate that. Yeah, I’m sorry that I don’t know the answer to that question. I should know, but I’m not 100% sure. But I think that’s right. I think the governor gets to name a temporary replacement, and then at some point, there’s a special election. And that replacement can run in that election, but oftentimes gets challenged. And then the winner of that election… And I don’t know when that happens, and I think it also depends on which state. These rules probably vary state by state. But, going back to Coni’s main concern, I would like to think that President Trump is not nominating anybody to his cabinet where that seat isn’t already safely in Republican hands for one reason or another.
So, we talked about OZ Extension. I wanna talk now about Opportunity Zone renewal, because a two-year extension of our current Opportunity Zone program would be great. But what would be even better would be, what if we take this OZ concept, and just redo it all over again for another eight-year run? So, this is Opportunity Zones 2.0. It’s a whole new Opportunity Zones program. It’s sometimes referred to as a renewal or a reauthorization of Opportunity Zones. So, there are a few groups that are working with Capitol Hill staffers, and internally with their own members of these groups, to come up with some early concept ideas for an OZ 2.0. I should mention, by the way, that none of these concept ideas are official. None of these are published anywhere. These are just kind of rumors and murmurings that I’ve heard from, in bits and pieces, from the following groups, including the America First Policy Institute, the Economic Innovation Group, the Novogradac Opportunity Zones Working Group, and the Opportunity Funds Association. Please do not take any of this as gospel. None of this is written in stone. No formal proposals have been made. No bills have been drafted yet. Okay?
So, but with that caveat, I’ve gleaned some of the following information, and it’s subject to change, and it probably will change at some point within the next few months here, as legislation does get introduced into the House. So, some concept ideas, and these are early, authorization of brand-new Opportunity Zone census tracts, and possibly that new program would run from maybe, let’s say, 2027 through 2035, much like how this current one is running from 2018 through 2026, about an eight-year period. It would be new census tract designations, using the 2020 map. If we go back to that map I showed you a few minutes ago, that’s actually using the 2010 census map. We get a new census map from the U.S. Census Bureau every 10 years, and the geography of those census tracts changes ever so slightly every decade. Some other ideas of how Opportunity Zones may be reauthorized but improved, likely there may be tighter requirements for a tract to qualify as low-income. Currently, the governors of each state and the mayor of Washington, D.C. got to nominate census tracts to the Treasury Department, to the IRS, within the Treasury Department. But in order to do so, they could only nominate tracts that were eligible to be nominated as Opportunity Zones. In order to be eligible, you had to be low-income, or low-income-adjacent, and also follow some additional criteria.
The definition of low income is borrowed from the New Markets Tax Credit policy, that’s been in the Internal Revenue Code for I think decades. OZ proponents are suggesting maybe we shouldn’t borrow the exact same language from the NMTC. Maybe we should draft our own language, and basically put some additional guardrails on the governors’ nomination choices, make it a little bit more difficult for a zone to qualify as an Opportunity Zone. So, that’s one idea. Another idea would be to allow for additional incentives if a project creates a certain number of jobs, or if it provides for a certain number of affordable housing units. No concrete numbers there, but that’s another idea that’s floating around. This is a pretty easy one, would be, we may allow for investment of after-tax dollars, or non-gains dollars. That would really democratize the program. One question I get pretty frequently, I’d say it’s one of the top five most frequent questions I get, is, “Hey, Jimmy, I get that you can take gains that you just triggered, and defer them, and maybe you do a basis step-up if you came in prior to 2021, and you get this big 10-year benefit. But can I just come in with non-gains dollars, and I don’t really care about the deferral or the basis step-up. I just want to get that 10-year benefit.” And it’s unfortunately, no. Under this current program, you cannot bring in after-tax dollars. You cannot bring in non-gains dollars. They have to be pre-tax capital gains dollars are the only dollars you can bring into the program. So, allowing for after-tax dollars would really open up the program to a lot more investors.
I spoke a minute ago about how the OZ 1.5 would introduce this fund of funds concept, allow for feeder funds to invest directly into other QOFs. That’s an idea for this OZ 2.0. Another idea is this rolling deferral period here. I’ll talk about this for a minute. So, under the current program, there’s one deferral date etched in stone into the Internal Revenue Code, December 31, 2026. That’s the deferral date for everybody, no matter when you made your investment. One way to possibly improve the Opportunity Zone incentive for an OZ 2.0, starting in a few years, would be, what if that deferral period’s rolling? What if, no matter when you come in, you always have a five-year deferral period? It would make it more enticing for somebody coming in toward the end of the program. Because right now, if you make an Opportunity Zone investment right now, you get a two-year deferral. It’s like, well, that’s not really worth anything anymore, hardly. It was pretty cool when you made an Opportunity Zone investment in 2019, right? Because you got a, what is it, seven-year deferral period. That’s a pretty good deferral period. So, the fact that that changes incentivizes early adopters of Opportunity Zones. I think that’s one of many reasons why we’ve seen a drop-off in fundraising over the past couple years, for a whole variety of reasons, but one reason, because that deferral piece just really isn’t worth much anymore. And I’ve been surprised by how important that deferral piece is to investors. So, the rolling deferral period would kind of get at that issue.
I do think that there’s some consequences of doing this that could be negative. One, it probably scores a little bit worse. It costs more for…and it’s a little bit harder for passage of a bill, because it would cost a little bit more. And then, another thing it does is it doesn’t really reward early adoption into the program. So, I don’t know. Let me know what you think, though, about that idea in the chat, if you have any thoughts. And then one final idea for an OZ 2.0 is, instead of just rolling out another program with an 8 to 10-year run, and I’m kind of just guesstimating this would run from ’27 through ’35, it would also introduce some language into the Internal Revenue Code such that it would make the incentive permanent. Now, you can’t really make an economic development program like this permanent in the sense that this is the map forever, right? But instead, I think you would want governors to nominate new census tracts every so often. Maybe every 8 to 10 years, they get another bite of the apple, and we get a new map, more or less lining up with when the maps get updated every ten years. So, there’s a few more early concept ideas, but these are the ones that I’ve heard the most support of, and these are the ones that I think have the most traction heading into next year’s new session of Congress.
So, now I wanna speculate even a little bit more. This is my official prediction, I guess, but it’s not official. So, this is, please do not take this as gospel. This is a very speculative timeline on what may unfold, one possible scenario that may unfold. This might end up looking much different than this in reality. The only thing that I know pretty much for certain is that on January 20th, Donald Trump will be inaugurated as our 47th president. I think it’s likely that within the first 100 days of his presidency that some tax legislation gets introduced in the House, the House Ways and Means Committee introduces some tax legislation. It will probably get marked up and go back and forth among members of the House quite a bit. Eventually, they’ll pass a House bill, under budget reconciliation, and it’ll move to the Senate. When the Senate gets it, it goes to the Senate Finance Committee, and then they get to mark it up, and then they debate about it on the Senate floor.
Now, in order to make a tax bill filibuster-proof, they use this tool called budget reconciliation. Budget reconciliation is how the Tax Cuts and Jobs Act was initially passed, in 2017. So, it did not need a 60-vote majority in the Senate to bypass the filibuster, but when you use the budget reconciliation mechanism, so long as that all of the provisions of the tax legislation have a direct impact on fiscal revenue and fiscal spending, the debate on the Senate floor is limited to 24 hours. So that essentially filibuster-proofs it, which is why you really only need 50 members of the Senate, out of the 52 or 53 Republicans. You only need 50 of them to vote for it, and then, of course, JD Vance would break the tie, and make it 51 to 50 final. So I’m anticipating that while we are going to get some tax legislation introduced in the House in the early part of 2025, that whole process, of kind of getting kicked around in the House, going to the Senate, getting kicked around in the Senate Finance Committee, getting voted on, and then going back to the House, if they marked it up enough, that whole process can take months.
In 2017, it took right up until the end of the year. December 22nd was when it was enacted by President Trump. I would expect something similar, especially given that slim majority in the House that I talked about earlier. So, I’m assuming in late 2025, Trump will sign new tax legislation, basically a TCJA renewal, into effect. Others are just simply calling this the second half of the year. I’m gonna go on the record as saying I think it’s gonna happen late in the year. I’d be surprised if it happened before December. I think the Congress is a lot like a high school student, right? You don’t do your homework a week in advance. You wait to do it the night before. Right? So, I think that’s probably gonna be the case here as well, again. And I do think it is very likely that tax legislation does get enacted. I think it would be disastrous if it doesn’t. And again, failure is really not an option for the Republican Party. They absolutely have to pass tax legislation, under budget reconciliation. They have a mandate to do it. They’re gonna have the mechanism to do it. They don’t need any support from the Democratic Party at all. They just need to rally their own troops, and make sure that whatever tax legislation they push through has enough support from the Republican members of Congress to get through.
Now, things get really speculative. So, I don’t know, does 1.5 and 2.0 get passed? Or maybe they skip 1.5 and only do 2.0? Or maybe, and I hope not, I hope 2.0 at least is a part of this tax legislation. But there might be a chance that only 1.5 gets through, and they might save 2.0 for a later date. I’m hopeful that 1.5 and 2.0 get through, or at very least, 2.0 gets through. In which case, if this gets enacted in 2025, I think in 2026, that would be a period when new census tracts would be nominated for that OZ 2.0 designation. Now, recall this first program, this current version 1.0, those census tracts were nominated in a very abbreviated period of time. A lot of state leaders, governors and governor staffers, weren’t really even aware of Opportunity Zones until it was just time to nominate them, and it was kind of rushed. Other states were a little bit more on top of it. But all in all, the process of nominating Opportunity Zones the first time around was a very rushed process. I think it’s gonna be much more organized in a 2.0. They might even have a longer period of time to do it if 1.5 is kind of running concurrently. I’m kind of assuming that maybe in 2027 is when they designate the tracts. They might have a full year to nominate census tracts, and then the OZ 2.0 program would officially begin and run from ’27 through ’35. Again, I’m just speculating here. This is a approximate timeline. All of this stuff is subject to change, of course.
And then, I’ve got a couple more dates in here. December 31, ’28 would be when the current version 1.0, upgraded 1.5, would sunset. And then I’m assuming maybe something around December 31, ’35 is when OZ 2.0 would sunset. That’d be the deferral date there, if there’s not a rolling deferral date, so… And then, of course, there’s always the possibility, potential for the program to renew automatically every 10 years, if they enact some sort of permanence provision.
Well, I promised everybody in attendance that you’d get a free copy of my 2025 Opportunity Zone Legislation Report. So, it’s at that QR code if you wanna scan that QR code on your screen now. Or you can head to opportunityzones.com/2025legislation. I’m also gonna type this into the chat right now also, because I’m about to go to the next slide, and I do wanna spend a few minutes talking about my OZ Insiders Mastermind group as well. So, I’ve just typed that link into the chat. And I’ve got a few comments and questions in the chat as well. I’m gonna hold off on those for a minute, because I do wanna keep going here. But please do scan that QR code now, or click that link in the chat to download that free report. It’s my new free bonus guide for everybody who attended today, the 2025 OZ Legislation Report.
But for the last few minutes, I did wanna talk about OZ Insiders, my private Opportunity Zone mastermind and group coaching community. If you liked this presentation today, and I hope you did, a lot of what I presented today, I learned from being inside of OZ Insiders mastermind group and talking to other members in there. And this is very much the format that a lot of the discussion within OZ Insiders takes place. This is really kind of like a preview of OZ Insiders, for everybody out there watching today. And if you’re an OZ Insiders member, I hope you’ll agree that this is very much kind of the flavor of an OZ Insiders master class. Albeit this one’s instructed by me, and usually I go out and bring in a guest instructor to do our monthly classes. But ozinsiders.com is where you can learn more about OZ Insiders. And I’m just gonna take a few minutes to tell you a little bit more about it, what’s inside, and what you’ll get if you join. You can scan that QR code. That’ll take you to ozinsiders.com, or just type in ozinsiders.com.
So, this is my private OZ group coaching and mastermind group. So, first off, you get live group coaching. We just started doing this two months ago. The first two sessions have been fantastic, the live group coaching. You can see, this is a sneak peek at the call that we did last week. Quite a few members there, and those are only the ones that have their video cameras turned on. We had, I think we had a couple dozen members in attendance for that last group coaching, and really, it’s just kind of an open discussion for a half an hour, where you can pepper me with any OZ questions you have, and we have a lot of experts in the group as well. Some expert attorneys. Ashley Tison’s in there. Andrew Doup is in there. Brett Siglin is in there. These guys are terrific. If I don’t know the answer to their question, they certainly will. And of course, Coni Rathbone, who’s here today, another prominent Opportunity Zone attorney. So, if I don’t know the answer, one of these four almost certainly does. So, that’s a good way to kind of help get you from beginner to advanced, or from advanced to next step on your Opportunity Zone journey. So, when you join OZ Insiders, you’ll get that live group coaching, but you also get access to our Rolodex of Opportunity Zone professionals, all of our members and all of the contacts that I have in my head, people like Coni, people like Ashley, people like Brett, people like Andrew, and our other members, who are developing projects all over the country, or working in some capacity in Opportunity Zones all over the country. If you’re in a particular area of the country and you wanna meet somebody else working on Opportunity Zones in that area of the country, chances are I know a few people in your neck of the woods.
So, when you join, you’ll get that live group coaching. You’ll get access to our Rolodex of Opportunity Zone professionals. You’ll also get access to our live monthly master classes, plus access to our library of all previous master classes. And we do these every month, on the second Monday of each month. Here’s a upcoming schedule of what we have planned for upcoming months. Our December master class, coming up a couple weeks after Thanksgiving, will feature Blake Christian, a prominent CPA, from HCVT. He’s gonna be instructing a class on salvaging blown Qualified Opportunity Funds and Qualified Opportunity Zone businesses. What do you do if your QOF got screwed up somehow? Blake might have the cure. In January, Todd Vitzthum, another OZ Insider member, is gonna be teaching a class on how to underwrite real estate deals in 2025. And then, I haven’t announced the guest instructor for this one quite yet. We’re still ironing out the details, but the topic’s gonna be the political year ahead for real estate. And we’ll be focusing largely on Opportunity Zones. I think we might know a little bit more about what legislation might end up looking like by mid-February as well. So, those are our next three upcoming master class events at OZ Insiders. We do all of these calls via Zoom, just like the one we’re doing here today.
But in addition to that, you also get access to our library of every master class we’ve ever done. And I think we have 12 or 13 or 14 of them in there right now. We launched this about a year ago. So we’ve got at least 12 in there now. A quick look at four of the most recent ones, or four of the most popular ones, couple weeks ago, it was just last week, actually, we did that master class with Emily Lavery, and she brought in Shay Hawkins and Mannar Hanna, from Senator Tim Scott’s office. And she discussed “What a Second Trump Presidency Means For Opportunity Zones.” And it was a great deep dive from Emily, as well as a couple of other Capitol Hill insiders, on exactly how OZ legislation may shape out. Shay Hawkins had previously covered OZ legislation in a different master class earlier this year. Chris Loeffler, the CEO of Caliber, joined us for a class on “Distressed OZ Real Estate Investing Strategy.” And then Mr. Ashley Tison from OZPros joined us. I think this was one of the first ones we had. It was either late last year or the very beginning of this year, “Structuring OZ Deals,” kind of an OZ deal structuring 101 crash course.
So, you’ll get, when you join OZ Insiders, live group coaching. I discussed that. I also discussed access to our Rolodex of OZ professionals from all around the country. Access to live monthly master classes, access to our library of every single previous master class that we’ve ever hosted. But you also get 24/7 access to our private group chat. We have a private group chat on the Slack app, that we regularly correspond in and communicate in. And if I ever see anything interesting OZ-related, I post it there. Some good discussions happen in that private chat group. So, you’ll get live group coaching, access to our Rolodex of OZ professionals, live monthly master classes, access to every single master class we’ve ever done in the past, 24/7 access to that private chat group on Slack, and also invitations to private in-person events that we host. We hosted three dinners in 2024. This is a picture of our dinner in Washington, D.C., earlier this month. This was actually on election night. We’ve got the TV tuned into CNN in the background here. We had about 20 or so members show up for that one. This was our Dallas event that we did back in, I think it was March or April earlier this year. We had a dozen people show up for that. We also did a event at Gibsons in Chicago. And this is a picture of me speaking at the University of Notre Dame. That was actually late last year.
So, we do quite a bit online, of course, with the webinars, master classes, monthly group coaching via Zoom, but it’s great to meet in person. And I love meeting all of you in person, and getting to interact with the OZ community in person. So, we’re fresh off that event that we did with Novogradac, in Washington, D.C. A couple weeks ago. That one was great. And we’re gonna do four dinners in 2025. And this list is still subject to change, and still kind of in flux, but I know for sure we’re definitely hitting Los Angeles in either late winter or early spring of 2025. We’re gonna do one in my backyard here, and it’ll either be in Fort Worth or Dallas. Probably that one’ll be in about May or June of 2025. We’re gonna hit up Las Vegas, most likely in September of 2025. And then, for sure, we’re gonna hit up Washington, D.C., in November of 2025, around the time, probably the night of or the night before the Novogradac Opportunity Zone Summit that they have planned out there. So, if you’re a member of our group, you get invitations to each of these dinners that we host. And dinner’s on me. It’s always a fun night of great camaraderie, a cocktail or two, and usually a pretty good steak dinner also. So, I hope you’ll join us for one or more of these in-person dinners and meetups in 2025.
So, that’s OZ Insiders. I hope you’ll click that link, ozinsiders.com, or scan that QR code to learn more. You can join today. It’s $299 per month. We also have a annual membership option. You can save 17%. It’s $2,999 per year. And then, maybe you’re part of a group. We do have a corporate membership rate, which gives you a discount as well. Just email me to ask about that. But I wanna do something special for everybody here today. So, if you join today, if you join before midnight tonight, you’ll receive everything. And just to recap everything, you get live group coaching, you get access to our Rolodex of OZ professionals, you get live monthly master classes, access to our library of every single previous master class we’ve ever hosted, 24/7 access to our private chat group, invitations to all of our private in-person events, and a bonus for today only, I don’t always offer this, but if you join today, I will do a free one-on-one strategy call with you. So, I’ll get on the phone with you for 30 to 60 minutes, and we can discuss anything that you wanna discuss one-on-one, regarding Opportunity Zones.
I should mention that, and I don’t think this is in the slide deck, but we also do have a 60-day money back guarantee, no questions asked. So, if you sign up today, and then by, let’s see, mid-January or so, you decide, hey, this isn’t for me, we can cancel your membership, give you all your money back, no questions asked. And you can just go month to month, with the monthly option. Obviously, the yearly option, you just pay once per year. And that is it. That’s ozinsiders.com. I hope you’ll join me today. Again, if you do join by today, before midnight, you do get a free one-on-one strategy call with me. And with that, we’re at the top of the hour, so I wanna thank you, thank everybody for joining me today on today’s OZ Insiders-sponsored webinar. I hope this was enlightening for you. We’re a little bit over time, but so, if anybody has to hop off, I won’t hold it against you, but I did wanna get to a few of the comments in the chat. If you have any questions for me, also, I’m happy to answer them. I’ll stay around for a few more minutes here.
So, let’s see. Nandish says, “Though not optimal for investors, in OZ 2.0, the recapture should be disallowed, and the capital gains forgiven. If investment held till end of 10-year period, this will bring more capital gains to OZ, which was the initial intent.” Yeah. So, Nandish, you’re hitting on a point that, I believe you’re referring to depreciation recapture. So, with Opportunity Zone investments currently, you can depreciate the asset over time, just like you would any type of investment, particularly a real estate investment. You can do a cost seg study also, and get bonus depreciation. At the end of your hold period, when you go to sell that asset, typically, in a non-OZ deal, you have to pay depreciation recapture tax. So, if you had a million-dollar asset, and you were able to depreciate, let’s say, $250,000 of it over a 10-year period, you’re essentially offsetting your income by $25,000 or so every year, which is great. But then at the end of it, when you go to sell, that $250,000 depreciation that you took over the lifetime of the hold period gets recaptured, usually at a 25% tax rate. That can fluctuate a little bit, depending on some variety of factors, but 25% of $250,000 is a pretty good tax bill. With an Opportunity Zone investment, however, the IRS doesn’t recapture that $250,000 depreciation that you took, so you escape that tax-free as well. So it’s kind of another little hidden benefit of OZ investing. So, I think, are you suggesting that recapture should be disallowed? So, it’s already disallowed, but maybe you’re saying that the recapture shouldn’t be disallowed? I’m not really sure what your point is there, Nandish. Maybe you can clarify if you’re still here. But in any case, I love that depreciation recapture is eliminated with OZ investments. Thanks for pointing that out.
Charles says, “The New York State Legislature is taking steps to fight against the Trump agenda, even though the OZ program was a bipartisan initiative by Cory Booker and Tim Scott. I am a good Democrat, with good state contacts, but want to work to help defeat a proposed bill by Senator Mike Gianaris and Assemblyman Jeff Dinowitz, that would make it even more difficult for New Yorkers to make investments in the program. I would like to work with a team to lobby effectively.” Chuck, love that. And thanks for being supportive of the OZ program. You’re absolutely right. It is broadly bipartisan-supported. I think New York’s making a mistake. I think California’s making a mistake by not conforming with the program. Email me, Chuck. I’ll put my email address in here, [email protected]. Send me an email, and I’ll see if I can get you in touch with some people that might be able to help contribute to your efforts there.
Rhonda says, let’s see, “Thanks, Jimmy, for such a wonderful support to Americans.” Thank you, Rhonda. Thanks for being here. David says, “Thank you for the useful and timely info.” Thanks, David. Edward Jones says, “Thanks, Jimmy. Great info.” Thank you, Edward. And Nandish says, “Excellent info, Jimmy. Very grateful.” Sorry. “Very grateful for all your efforts, bringing amazing and valuable information to small-scale individual investors.” Happy to do it. Thanks for being here today. Jeff says, “If you sell a property inside of the 10 years while in a fund, can you roll into another OZ and keep it rolling, like you can with a 1031? If not, it’d be nice to be able to roll to another one if OZ 2.0 happens in 2025.” So, Jeff, it depends. If it happens within the fund, I believe it’s possible, though you would need to talk with an accountant or an attorney to get further clarification on that. If it happens… So let me back up. If it happens within the fund, meaning that the fund itself doesn’t have an exit, but the holding companies within the funds are able to turn over some of their assets, that’s fine. But if the fund itself has an exit, and it gets kicked back up to you, the investor, that’s an inclusion event, and I do believe that starts over your 10-year clock. But I have heard different interpretations of that, and I would really encourage you to speak with a CPA or an attorney to get a verdict on your individual case there.
Nandish says, “What you explained is what I meant. Thanks for clarifying my cryptic…” Okay. So, thank you, Nandish. I’m glad I was able to get you the answer there. Coni Rathbone just chimed in. She says, “You can sell and pay tax, but fund does not fail. You have to replace the property in 12 months.” Okay. So, thanks for chiming in there, Coni.
That is all. I hope you enjoyed today’s webinar. I don’t see any other questions or comments. This was a great engagement from everybody here today. I really appreciate your time and your great comments and questions throughout the course of the event today. Thank you, everybody. And please do visit ozinsiders.com to learn more. I’d love to add more members to the group. We’ve got very big plans for 2025. Thanks again, everybody, for being here today. I’m Jimmy Atkinson, and we’ll be back soon with another episode or webinar. Please follow us on YouTube to get the latest. You can learn more at OpportunityZones.com. Thanks, everybody.