[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2292 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 2292
To amend the Internal Revenue Code of 1986 to establish special rules
for capital gains invested in brownfield and superfund sites.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 24, 2025
Mr. Edwards (for himself and Ms. Crockett) introduced the following
bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish special rules
for capital gains invested in brownfield and superfund sites.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Economic Opportunity for Distressed
Communities Act''.
SEC. 2. ESTABLISHMENT OF SPECIAL RULES FOR CAPITAL GAINS INVESTED IN
DISTRESSED OPPORTUNITY ZONES.
(a) In General.--Subchapter Z of chapter 1 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new section:
``SEC. 1400Z-3. SPECIAL RULES FOR CAPITAL GAINS INVESTED IN DISTRESSED
OPPORTUNITY ZONES.
``(a) In General.--
``(1) Treatment of gains.--In the case of capital gains
from the sale to, or exchange with, an unrelated person of any
property held by the taxpayer, at the election of the
taxpayer--
``(A) gross income for the taxable year shall not
include so much of such gain as does not exceed the
aggregate amount invested by the taxpayer in a
qualified distressed opportunity fund during the 180-
day period beginning on the date of such sale or
exchange,
``(B) the amount of gain excluded by subparagraph
(A) shall be included in gross income as provided by
subsection (b), and
``(C) subsection (c) shall apply.
``(2) Election.--No election may be made under paragraph
(1)--
``(A) with respect to a sale or exchange if an
election previously made with respect to such sale or
exchange is in effect, or
``(B) with respect to any sale or exchange after
December 31, 2033.
``(b) Deferral of Gain Invested in Qualified Distressed Opportunity
Zone Property.--
``(1) Year of inclusion.--Gain to which subsection
(a)(1)(B) applies shall be included in income in the taxable
year which includes the earlier of--
``(A) the date on which such investment is sold or
exchanged, or
``(B) December 31, 2033.
``(2) Amount includible.--
``(A) In general.--The amount of gain included in
gross income under subsection (a)(1)(A) shall be the
excess of--
``(i) the lesser of the amount of gain
excluded under paragraph (1) or the fair market
value of the investment as determined as of the
date described in paragraph (1), over
``(ii) the taxpayer's basis in the
investment.
``(B) Determination of basis qualified distressed
opportunity zone property.--
``(i) In general.--Except as otherwise
provided in this clause or subsection (c), the
taxpayer's basis in the investment shall be
zero.
``(ii) Increase for gain recognized under
subsection (a)(1)(B).--The basis in the
investment shall be increased by the amount of
gain recognized by reason of subsection
(a)(1)(B) with respect to such property.
``(iii) Investments held for 5 years.--In
the case of any investment held for at least 5
years, the basis of such investment shall be
increased by an amount equal to 10 percent of
the amount of gain deferred by reason of
subsection (a)(1)(A).
``(iv) Investments held for 7 years.--In
the case of any investment held by the taxpayer
for at least 7 years, in addition to any
adjustment made under clause (iii), the basis
of such property shall be increased by an
amount equal to 5 percent of the amount of gain
deferred by reason of subsection (a)(1)(A).
``(c) Special Rule for Investments Held for at Least 10 Years.--In
the case of any investment held by the taxpayer for at least 10 years
and with respect to which the taxpayer makes an election under this
subsection, the basis of such property shall be equal to the fair
market value of such investment on the date that the investment is sold
or exchanged.
``(d) Qualified Distressed Opportunity Fund.--For purposes of this
section--
``(1) In general.--The term `qualified distressed
opportunity fund' means any investment vehicle which is
organized as a corporation or a partnership for the purpose of
investing in qualified distressed opportunity zone property
(other than another qualified distressed opportunity fund) that
holds at least 90 percent of its assets in qualified distressed
opportunity zone property, determined by the average of the
percentage of qualified distressed opportunity zone property
held in the fund as measured--
``(A) on the last day of the first 6-month period
of the taxable year of the fund, and
``(B) on the last day of the taxable year of the
fund.
``(2) Qualified distressed opportunity zone property.--
``(A) In general.--The term `qualified distressed
opportunity zone property' means property which is--
``(i) qualified distressed opportunity zone
stock,
``(ii) qualified distressed opportunity
zone partnership interest, or
``(iii) qualified distressed opportunity
zone business property.
``(B) Qualified distressed opportunity zone
stock.--
``(i) In general.--Except as provided in
clause (ii), the term `qualified distressed
opportunity zone stock' means any stock in a
domestic corporation if--
``(I) such stock is acquired by the
qualified distressed opportunity fund
after December 31, 2025, at its
original issue (directly or through an
underwriter) from the corporation
solely in exchange for cash,
``(II) as of the time such stock
was issued, such corporation was a
qualified distressed opportunity zone
business (or, in the case of a new
corporation, such corporation was being
organized for purposes of being a
qualified distressed opportunity zone
business), and
``(III) during substantially all of
the qualified distressed opportunity
fund's holding period for such stock,
such corporation qualified as a
qualified distressed opportunity zone
business.
``(ii) Redemptions.--A rule similar to the
rule of section 1202(c)(3) shall apply for
purposes of this paragraph.
``(C) Qualified distressed opportunity zone
partnership interest.--The term `qualified distressed
opportunity zone partnership interest' means any
capital or profits interest in a domestic partnership
if--
``(i) such interest is acquired by the
qualified distressed opportunity fund after
December 31, 2025, from the partnership solely
in exchange for cash,
``(ii) as of the time such interest was
acquired, such partnership was a qualified
distressed opportunity zone business (or, in
the case of a new partnership, such partnership
was being organized for purposes of being a
qualified distressed opportunity zone
business), and
``(iii) during substantially all of the
qualified distressed opportunity fund's holding
period for such interest, such partnership
qualified as a qualified distressed opportunity
zone business.
``(D) Qualified distressed opportunity zone
business property.--
``(i) In general.--The term `qualified
distressed opportunity zone business property'
means tangible property used in a trade or
business of the qualified distressed
opportunity fund if--
``(I) such property was acquired by
the qualified distressed opportunity
fund by purchase (as defined in section
179(d)(2)) after December 31, 2025,
``(II) the original use of such
property in the qualified distressed
opportunity zone commences with the
qualified distressed opportunity fund
or the qualified distressed opportunity
fund substantially improves the
property, and
``(III) during substantially all of
the qualified distressed opportunity
fund's holding period for such
property, substantially all of the use
of such property was in a qualified
distressed opportunity zone.
``(ii) Substantial improvement.--For
purposes of subparagraph (A)(ii), property
shall be treated as substantially improved by
the qualified distressed opportunity fund only
if, during any 30-month period beginning after
the date of acquisition of such property,
additions to basis with respect to such
property in the hands of the qualified
distressed opportunity fund exceed an amount
equal to the adjusted basis of such property at
the beginning of such 30-month period in the
hands of the qualified distressed opportunity
fund.
``(iii) Related party.--For purposes of
subparagraph (A)(i), the related person rule of
section 179(d)(2) shall be applied pursuant to
subsection (e)(2) in lieu of the application of
such rule in section 179(d)(2)(A).
``(3) Qualified distressed opportunity zone business.--
``(A) In general.--The term `qualified distressed
opportunity zone business' means a trade or business--
``(i) in which substantially all of the
tangible property owned or leased by the
taxpayer is qualified distressed opportunity
zone business property (determined by
substituting `qualified distressed opportunity
zone business' for `qualified distressed
opportunity fund' each place it appears in
subparagraph (D)),
``(ii) which satisfies the requirements of
paragraphs (2), (4), and (8) of section
1397C(b), and
``(iii) which is not described in section
144(c)(6)(B).
``(B) Special rule.--For purposes of subparagraph
(A), tangible property that ceases to be a qualified
distressed opportunity zone business property shall
continue to be treated as a qualified distressed
opportunity zone business property for the lesser of--
``(i) 5 years after the date on which such
tangible property ceases to be so qualified, or
``(ii) the date on which such tangible
property is no longer held by the qualified
distressed opportunity zone business.
``(4) Qualified distressed opportunity zone.--The term
`qualified distressed opportunity zone' means--
``(A) a brownfield site (as defined in section
101(39) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980), or
``(B) a facility that is included on the National
Priorities List developed by the President in
accordance with section 105(a)(8)(B) of the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980.
``(e) Applicable Rules.--
``(1) Treatment of investments with mixed funds.--In the
case of any investment in a qualified distressed opportunity
fund only a portion of which consists of investments of gain to
which an election under subsection (a) is in effect--
``(A) such investment shall be treated as 2
separate investments, consisting of--
``(i) one investment that only includes
amounts to which the election under subsection
(a) applies, and
``(ii) a separate investment consisting of
other amounts, and
``(B) subsections (a), (b), and (c) shall only
apply to the investment described in subparagraph
(A)(i).
``(2) Related persons.--For purposes of this section,
persons are related to each other if such persons are described
in section 267(b) or 707(b)(1), determined by substituting `20
percent' for `50 percent' each place it occurs in such
sections.
``(3) Decedents.--In the case of a decedent, amounts
recognized under this section shall, if not properly includible
in the gross income of the decedent, be included in gross
income as provided by section 691.
``(4) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this section, including--
``(A) rules for the certification of qualified
distressed opportunity funds for the purposes of this
section,
``(B) rules to ensure a qualified distressed
opportunity fund has a reasonable period of time to
reinvest the return of capital from investments in
qualified distressed opportunity zone stock and
qualified distressed opportunity zone partnership
interests, and to reinvest proceeds received from the
sale or disposition of qualified distressed opportunity
zone property, and
``(C) rules to prevent abuse.
``(f) Failure of Qualified Distressed Opportunity Fund To Maintain
Investment Standard.--
``(1) In general.--If a qualified distressed opportunity
fund fails to meet the 90-percent requirement of subsection
(d)(1), the qualified distressed opportunity fund shall pay a
penalty for each month it fails to meet the requirement in an
amount equal to the product of--
``(A) the excess of--
``(i) the amount equal to 90 percent of its
aggregate assets, over
``(ii) the aggregate amount of qualified
distressed opportunity zone property held by
the fund, multiplied by
``(B) the underpayment rate established under
section 6621(a)(2) for such month.
``(2) Special rule for partnerships.--In the case that the
qualified distressed opportunity fund is a partnership, the
penalty imposed by paragraph (1) shall be taken int account
proportionately as part of the distributive share of each
partner of the partnership.
``(3) Reasonable cause exception.--No penalty shall be
imposed under this subsection with respect to any failure if it
is shown that such failure is due to reasonable cause.''.
(b) Clerical Amendment.--The table of sections for subchapter Z of
chapter 1 is amended by adding at the end the following new item:
``Sec. 1400Z-3. Special rules for capital gains invested in distressed
opportunity zones.''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts invested after the date of the enactment of this Act.
<all>