[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3687 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 3687
To amend the Internal Revenue Code of 1986 to renew and enhance
opportunity zones, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 3, 2025
Mr. Kelly of Pennsylvania 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 renew and enhance
opportunity zones, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. RENEWAL AND ENHANCEMENT OF OPPORTUNITY ZONES.
(a) Modification of Low-Income Community Definition.--Section
1400Z-1(c)(1) of the Internal Revenue Code of 1986 is amended--
(1) by striking ``communities.--The term'' and inserting
the following: ``communities.--
``(A) In general.--The term'', and
(2) by adding at the end the following:
``(B) Modifications.--For purposes of subparagraph
(A), section 45D(e)(1) shall be applied in subparagraph
(B) thereof, by substituting `70 percent' for `80
percent' each place it appears.
``(C) Certain census tracts disallowed.--The term
`low-income community' shall not include any population
census tract if--
``(i) in the case of a tract not located
within a metropolitan area, the median family
income for such tract is at least 125 percent
of statewide median family income, or
``(ii) in the case of a tract located
within a metropolitan area, the median family
income for such tract is at least 125 percent
of the metropolitan area median family
income.''.
(b) New Round of Qualified Opportunity Zone Designations.--
(1) In general.--Section 1400Z-1 of such Code is amended by
adding at the end the following new subsection:
``(g) New Round of Qualified Opportunity Zone Designations.--
``(1) In general.--In addition to designations under
subsection (b), and under rules similar to the rules of such
subsection, the Secretary shall designate tracts nominated by
the chief executive officers of States for purposes of this
section.
``(2) Number of designations; proportion of rural areas
designated.--
``(A) In general.--Of the low-income communities
within a State, the Secretary may designate under this
subsection not more than 25 percent as qualified
opportunity zones, of which at least the lesser of the
following shall be qualified opportunity zones which
are comprised entirely of a rural area:
``(i) The applicable percentage of the
total number of qualified opportunity zone
designations which may be made within the State
under this subsection.
``(ii) All low-income communities within
the State which are comprised entirely of a
rural area.
``(B) Applicable percentage.--For purposes of this
paragraph, the applicable percentage shall be, for any
calendar year during which a designation is made, the
greater of--
``(i) 33 percent, or
``(ii) the percentage of the United States
population living within a rural area for the
preceding calendar year.
``(3) Rural area.--Whether a low-income community is
comprised entirely of a rural area shall be determined by the
Secretary in consultation with the Secretary of Agriculture.
For purposes of this subsection, the term `rural area' has the
meaning given such term by section 343(a)(13)(A) of the
Consolidated Farm and Rural Development Act.
``(4) Period for which designation is in effect.--A
designation as a qualified opportunity zone under this
subsection shall remain in effect for the period beginning on
January 1, 2027, and ending on December 31, 2033.
``(5) Contiguous tracts not eligible.--Subsection (e) shall
not apply to designations made under this subsection.''.
(2) Election with respect to new round of zones.--Section
1400Z-2(a)(2)(B) of such Code is amended by striking ``December
31, 2026'' and inserting ``December 31, 2033''.
(3) Year of inclusion.--Section 1400Z-2(b)(1)(B) of such
Code is amended to read as follows:
``(B)(i) December 31, 2026, in the case of an
amount invested before January 1, 2027, and
``(ii) December 31, 2033, in the case of an amount
invested after December 31, 2026, and before January 1,
2034.''.
(4) Winding down initial zone designations.--Section 1400Z-
1(f) of such Code is amended--
(A) by striking ``and ending'' and all that follows
and inserting the following: ``and ending on December
31, 2026.'', and
(B) by striking ``A designation'' and inserting
``Except as provided in subsection (g)(4), a
designation''.
(c) Modification of Opportunity Zone Investment Incentives.--
(1) Consolidated basis increases; rural zone basis
increase.--Section 1400Z-2(b)(2)(B) of such Code is amended by
adding at the end the following new clauses:
``(v) Consolidated basis increase for
investments after 2026.--In the case of
investments made after December 31, 2026--
``(I) clauses (iii) and (iv) shall
not apply, and
``(II) for any such investment held
by the taxpayer for at least 5 years,
the basis of such adjustment shall be
increased by an amount equal to 10
percent of the amount of gain deferred
by reason of subsection (a)(1)(A).
``(vi) Special rule for rural opportunity
funds.--Clause (v) shall be applied by
substituting `30 percent' for `10 percent' in
the case of an investment in a qualified rural
opportunity fund.
``(vii) Qualified rural opportunity fund.--
For purposes of clause (vi), a `qualified rural
opportunity fund' means a qualified opportunity
fund that holds at least 90 percent of its
assets in qualified opportunity zone property
which--
``(I) is qualified opportunity zone
business property substantially all of
the use of which, during substantially
all of the fund's holding period for
such property, was in a qualified
opportunity zone comprised entirely of
a rural area, or
``(II) is qualified opportunity
zone stock, or a qualified opportunity
zone partnership interest, in a
qualified opportunity zone business in
which substantially all of the tangible
property owned or leased is qualified
opportunity zone business property
described in subsection (d)(3)(A)(i)
and substantially all the use of which
is in a qualified opportunity zone
comprised entirely of a rural area.
For purposes of the preceding sentence,
property held in the fund shall be measured
under rules similar to the rules of subsection
(d)(1).''.
(2) Limited treatment of ordinary income.--Section 1400Z-
2(a) of such Code is amended by adding at the end the following
new paragraph:
``(3) Special rule for ordinary income.--In the case of any
ordinary income of the taxpayer for the taxable year--
``(A) the taxpayer may elect the application of
paragraph (1) with respect to so much of ordinary
income as does not exceed $10,000 (reduced by the
amount of any income with respect to which an election
pursuant to this paragraph has previously been made),
and
``(B) subsection (b)(2)(B) shall not apply to the
investment with respect to such election.''.
(3) Special rule for improvement of existing structures in
rural areas, including for data centers.--Section 1400Z-
2(d)(2)(D)(ii) of such Code is amended by inserting ``(50
percent of such adjusted basis in the case of property in a
qualified opportunity zone comprised entirely of a rural
area)'' after ``the adjusted basis of such property''.
(d) Information Reporting on Qualified Opportunity Funds and
Qualified Rural Opportunity Funds.--
(1) Filing requirements for funds and investors.--Subpart A
of part III of subchapter A of chapter 61 of such Code is
amended by inserting after section 6039J the following new
sections:
``SEC. 6039K. RETURNS WITH RESPECT TO QUALIFIED OPPORTUNITY FUNDS AND
QUALIFIED RURAL OPPORTUNITY FUNDS.
``(a) In General.--Every qualified opportunity fund shall file an
annual return (at such time and in such manner as the Secretary may
prescribe) containing the information described in subsection (b).
``(b) Information From Qualified Opportunity Funds.--The
information described in this subsection is--
``(1) the name, address, and taxpayer identification number
of the qualified opportunity fund,
``(2) whether the qualified opportunity fund is organized
as a corporation or a partnership,
``(3) the value of the total assets held by the qualified
opportunity fund as of each date described in section 1400Z-
2(d)(1),
``(4) the value of all qualified opportunity zone property
held by the qualified opportunity fund on each such date,
``(5) with respect to each investment held by the qualified
opportunity fund in qualified opportunity zone stock or a
qualified opportunity zone partnership interest--
``(A) the name, address, and taxpayer
identification number of the corporation in which such
stock is held or the partnership in which such interest
is held, as the case may be,
``(B) each North American Industry Classification
System (NAICS) code that applies to the trades or
businesses conducted by such corporation or
partnership,
``(C) the population census tracts in which the
qualified opportunity zone business property of such
corporation or partnership is located,
``(D) the amount of the investment in such stock or
partnership interest as of each date described in
section 1400Z-2(d)(1),
``(E) the value of tangible property held by such
corporation or partnership on each such date which is
owned by such corporation or partnership,
``(F) the value of tangible property held by such
corporation or partnership on each such date which is
leased by such corporation or partnership,
``(G) the approximate number of residential units
(if any) for any real property held by such corporation
or partnership, and
``(H) the approximate average monthly number of
full-time equivalent employees of such corporation or
partnership for the year (within numerical ranges
identified by the Secretary) or such other indication
of the employment impact of such corporation or
partnership as determined appropriate by the Secretary,
``(6) with respect to the items of qualified opportunity
zone business property held by the qualified opportunity fund--
``(A) the North American Industry Classification
System (NAICS) code that applies to the trades or
businesses in which such property is held,
``(B) the population census tract in which the
property is located,
``(C) whether the property is owned or leased,
``(D) the aggregate value of the items of qualified
opportunity zone property held by the qualified
opportunity fund as of each date described in section
1400Z-2(d)(1), and
``(E) in the case of real property, number of
residential units (if any),
``(7) the approximate average monthly number of full-time
equivalent employees for the year of the trades or businesses
of the qualified opportunity fund in which qualified
opportunity zone business property is held (within numerical
ranges identified by the Secretary) or such other indication of
the employment impact of such trades or businesses as
determined appropriate by the Secretary,
``(8) with respect to each person who disposed of an
investment in the qualified opportunity fund during the year--
``(A) the name and taxpayer identification number
of such person,
``(B) the date or dates on which the investment
disposed was acquired, and
``(C) the date or dates on which any such
investment was disposed and the amount of the
investment disposed, and
``(9) such other information as the Secretary may require.
``(c) Statement Required To Be Furnished to Investors.--Every
person required to make a return under subsection (a) shall furnish to
each person whose name is required to be set forth in such return by
reason of subsection (b)(8) a written statement showing--
``(1) the name, address and phone number of the information
contact of the person required to make such return, and
``(2) the information required to be shown on such return
by reason of subsection (b)(8) with respect to the person whose
name is required to be so set forth.
``(d) Definitions.--For purposes of this section--
``(1) In general.--Any term used in this section which is
also used in subchapter Z of chapter 1 shall have the meaning
given such term under such subchapter.
``(2) Full-time equivalent employees.--The term `full-time
equivalent employees' means, with respect to any month, the sum
of--
``(A) the number of full-time employees (as defined
in section 4980H(c)(4)) for the month, plus
``(B) the number of employees determined (under
rules similar to the rules of section 4980H(c)(2)(E))
by dividing the aggregate number of hours of service of
employees who are not full-time employees for the month
by 120.
``(e) Application to Qualified Rural Opportunity Funds.--Every
qualified rural opportunity fund (as defined in section 1400Z-
2(b)(2)(B)(vii)) shall file the annual return required under subsection
(a), and the statements required under subsection (c), applied--
``(1) by substituting `qualified rural opportunity' for
`qualified opportunity' each place it appears,
``(2) by substituting `section 1400Z-2(b)(2)(B)(vii)' for
`section 1400Z-2(d)(1)' each place it appears, and
``(3) by treating any reference (after the application of
paragraph (1)) to qualified rural opportunity zone stock, a
qualified rural opportunity zone partnership interest, a
qualified rural opportunity zone business, or qualified
opportunity zone business property as stock, an interest, a
business, or property, respectively, described in (I) or (II),
as the case may be, of section 1400Z-2(b)(2)(B)(vii).
``SEC. 6039L. INFORMATION REQUIRED FROM QUALIFIED OPPORTUNITY ZONE
BUSINESSES AND QUALIFIED RURAL OPPORTUNITY ZONE
BUSINESSES.
``(a) In General.--Every applicable qualified opportunity zone
business shall furnish to the qualified opportunity fund described in
subsection (b) a written statement in such manner and setting forth
such information as the Secretary may by regulations prescribe for
purposes of enabling such qualified opportunity fund to meet the
requirements of section 6039K(b)(5).
``(b) Applicable Qualified Opportunity Zone Business.--For purposes
of subsection (a), the term `applicable qualified opportunity zone
business' means any qualified opportunity zone business--
``(1) which is a trade or business of a qualified
opportunity fund,
``(2) in which a qualified opportunity fund holds qualified
opportunity zone stock, or
``(3) in which a qualified opportunity fund holds a
qualified opportunity zone partnership interest.
``(c) Other Terms.--Any term used in this section which is also
used in subchapter Z of chapter 1 shall have the meaning given such
term under such subchapter.
``(d) Application to Qualified Rural Opportunity Businesses.--Every
applicable qualified rural opportunity zone business (as defined in
subsection (b) determined after application of the substitutions
described in this sentence) shall furnish the written statement
required under subsection (a), applied--
``(1) by substituting `qualified rural opportunity' for
`qualified opportunity' each place it appears, and