2020 Census Results Have No Impact on Opportunity Zone Boundaries | Sullivan and Worcester
The IRS issued Announcement 2021-10 (the “Announcement”) in response to questions from the public regarding the potential effect that the 2020 Census results may have on the boundaries of previously designated Opportunity Zones.
As part of the Tax Cuts and Jobs Act, Congress added Sections 1400Z-1 and 1400Z-2 to the Internal Revenue Code. These sections created tax incentives for investing in low-income census tracts. As part of the law, the chief executives of each state and territory have designated specific eligible low-income census tracts as opportunity areas. The census tracts were based on the 2010 census. The Treasury Department then reviewed the submissions and, if approved, designated those census tracts as Qualified Opportunity Areas. Investing capital gains in qualified opportunity areas through an investment vehicle known as a qualified opportunity fund has allowed investors to reduce and defer tax on their investment and , ultimately, to receive any appreciation in the value of the interest in the qualified opportunity fund tax-free if the investment is held for at least 10 years.
When the 2020 census results were released, questions arose as to whether the boundaries of the Qualified Opportunity Zones would be changed based on the updated census results. The announcement clearly states that there will be no changes to the boundaries of the Qualified Opportunity Zones. The IRS has stated categorically and clearly that “the boundaries of designated qualified opportunity areas were established at the time they were designated and are not subject to change.”