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[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
``(2) by treating any reference (after the application of
paragraph (1)) to qualified rural opportunity zone stock, a
qualified rural opportunity zone partnership interest, or a
qualified rural opportunity zone business as stock, an
interest, or a business, respectively, described in (I) or
(II), as the case may be, of section 1400Z-2(b)(2)(B)(vii).''.
(2) Penalties.--
(A) In general.--Part II of subchapter B of chapter
68 of such Code is amended by inserting after section
6725 the following new section:
``SEC. 6726. FAILURE TO COMPLY WITH INFORMATION REPORTING REQUIREMENTS
RELATING TO QUALIFIED OPPORTUNITY FUNDS AND QUALIFIED
RURAL OPPORTUNITY FUNDS.
``(a) In General.--In the case of any person required to file a
return under section 6039K fails to file a complete and correct return
under such section in the time and in the manner prescribed therefor,
such person shall pay a penalty of $500 for each day during which such
failure continues.
``(b) Limitation.--
``(1) In general.--The maximum penalty under this section
on failures with respect to any 1 return shall not exceed
$10,000.
``(2) Large qualified opportunity funds.--In the case of
any failure described in subsection (a) with respect to a fund
the gross assets of which (determined on the last day of the
taxable year) are in excess of $10,000,000, paragraph (1) shall
be applied by substituting `$50,000' for `$10,000'.
``(c) Penalty in Cases of Intentional Disregard.--If a failure
described in subsection (a) is due to intentional disregard, then--
``(1) subsection (a) shall be applied by substituting
`$2,500' for `$500',
``(2) subsection (b)(1) shall be applied by substituting
`$50,000' for `$10,000', and
``(3) subsection (b)(2) shall be applied by substituting
`$250,000' for `$50,000'.
``(d) Inflation Adjustment.--
``(1) In general.--In the case of any failure relating to a
return required to be filed in a calendar year beginning after
2025, each of the dollar amounts in subsections (a), (b), and
(c) shall be increased by an amount equal to such dollar amount
multiplied by the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year determined by
substituting `calendar year 2024' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
``(2) Rounding.--
``(A) In general.--If the $500 dollar amount in
subsection (a) and (c)(1) or the $2,500 amount in
subsection (c)(1), after being increased under
paragraph (1), is not a multiple of $10, such dollar
amount shall be rounded to the next lowest multiple of
$10.
``(B) Asset threshold.--If the $10,000,000 dollar
amount in subsection (b)(2), after being increased
under paragraph (1), is not a multiple of $10,000, such
dollar amount shall be rounded to the next lowest
multiple of $10,000.
``(C) Other dollar amounts.--If any dollar amount
in subsection (b) or (c) (other than any amount to
which subparagraph (A) or (B) applies), after being
increased under paragraph (1), is not a multiple of
$1,000, such dollar amount shall be rounded to the next
lowest multiple of $1,000.''.
(B) Information required to be sent to other
taxpayers.--Section 6724(d)(2) of such Code is
amended--
(i) by striking ``or'' at the end of
subparagraph (KK),
(ii) by striking the period at the end of
the subparagraph (LL) and inserting a comma,
and
(iii) by inserting after subparagraph (LL)
the following new subparagraphs:
``(MM) section 6039K(c) (relating to disposition of
qualified opportunity fund investments), or
``(NN) section 6039L (relating to information
required from certain qualified opportunity zone
businesses and qualified rural opportunity zone
businesses).''.
(3) Electronic filing.--Section 6011(e) of such Code is
amended by adding at the end the following new paragraph:
``(8) Qualified opportunity funds and qualified rural
opportunity funds.--Notwithstanding paragraphs (1) and (2), any
return filed by a qualified opportunity fund or qualified rural
opportunity fund shall be filed on magnetic media or other
machine-readable form.''.
(4) Clerical amendments.--
(A) The table of sections for subpart A of part III
of subchapter A of chapter 61 of such Code is amended
by inserting after the item relating to section 6039J
the following new items:
``Sec. 6039K. Returns with respect to qualified opportunity funds and
qualified rural opportunity funds.
``Sec. 6039L. Information required from qualified opportunity zone
businesses and qualified rural opportunity
zone businesses.''.
(B) The table of sections for part II of subchapter
B of chapter 68 of such Code is amended by inserting
after the item relating to section 6725 the following
new item:
``Sec. 6726. Failure to comply with information reporting requirements
relating to qualified opportunity funds and
qualified rural opportunity funds.''.
(5) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after the date of the
enactment of this Act.
(e) Secretary Reporting of Data on Opportunity Zone and Rural
Opportunity Zone Tax Incentives.--
(1) In general.--As soon as practical after the date of the
enactment of this Act, and annually thereafter, the Secretary
of the Treasury, or the Secretary's delegate (referred to in
this section as the ``Secretary''), in consultation with the
Director of the Bureau of the Census and such other agencies as
the Secretary determines appropriate, shall make publicly
available a report on qualified opportunity funds.
(2) Information included.--The report required under
paragraph (1) shall include, to the extent available, the
following information:
(A) The number of qualified opportunity funds.
(B) The aggregate dollar amount of assets held in
qualified opportunity funds.
(C) The aggregate dollar amount of investments made
by qualified opportunity funds in qualified opportunity
fund property, stated separately for each North
American Industry Classification System (NAICS) code.
(D) The percentage of population census tracts
designated as qualified opportunity zones that have
received qualified opportunity fund investments.
(E) For each population census tract designated as
a qualified opportunity zone, the approximate average
monthly number of full-time equivalent employees of the
qualified opportunity zone businesses in such qualified
opportunity zone for the preceding 12-month period
(within numerical ranges identified by the Secretary)
or such other indication of the employment impact of
such qualified opportunity fund businesses as
determined appropriate by the Secretary.
(F) The percentage of the total amount of
investments made by qualified opportunity funds in--
(i) qualified opportunity zone property
which is real property; and
(ii) other qualified opportunity zone
property.
(G) For each population census tract, the aggregate
approximate number of residential units resulting from
investments made by qualified opportunity funds in real
property.
(H) The aggregate dollar amount of investments made
by qualified opportunity funds in each population
census tract.
(3) Additional information.--
(A) In general.--Beginning with the report
submitted under paragraph (1) for the 6th year after
the date of the enactment of this Act, the Secretary
shall include in such report the impacts and outcomes
of a designation of a population census tract as a
qualified opportunity zone as measured by economic
indicators, such as job creation, poverty reduction,
new business starts, and other metrics as determined by
the Secretary.
(B) Semi-decennial information.--
(i) In general.--In the case of any report
submitted under paragraph (1) in the 6th year
or the 11th year after the date of the
enactment of this Act, the Secretary shall
include the following information:
(I) For population census tracts
designated as a qualified opportunity
zone, a comparison (based on aggregate
information) of the factors listed in
clause (iii) between the 5-year period
ending on the date of the enactment of
Public Law 115-97 and the most recent
5-year period for which data is
available.
(II) For population census tracts
designated as a qualified opportunity
zone, a comparison (based on aggregate
information) of the factors listed in
clause (iii) for the most recent 5-year
period for which data is available
between such population census tracts
and a similar population census tracts
that were not designated as a qualified
opportunity zone.
(ii) Control groups.--For purposes of
clause (i), the Secretary may combine
population census tracts into such groups as
the Secretary determines appropriate for
purposes of making comparisons.
(iii) Factors listed.--The factors listed
in this clause are the following:
(I) The unemployment rate.
(II) The number of persons working
in the population census tract,
including the percentage of such
persons who were not residents in the
population census tract in the
preceding year.
(III) Individual, family, and
household poverty rates.
(IV) Median family income of
residents of the population census
tract.
(V) Demographic information on
residents of the population census
tract, including age, income,
education, race, and employment.
(VI) The average percentage of
income of residents of the population
census tract spent on rent annually.
(VII) The number of residences in
the population census tract.
(VIII) The rate of home ownership
in the population census tract.
(IX) The average value of
residential property in the population
census tract.
(X) The number of affordable
housing units in the population census
tract.
(XI) The number and percentage of
residents in the population census
tract that were not employed for the
preceding year.
(XII) The number of new business
starts in the population census tract.
(XIII) The distribution of
employees in the population census
tract by North American Industry
Classification System (NAICS) code.
(4) Protection of identifiable return information.--In
making reports required under this subsection, the Secretary--
(A) shall establish appropriate procedures to
ensure that any amounts reported do not disclose
taxpayer return information that can be associated with
any particular taxpayer or competitive or proprietary
information, and
(B) if necessary to protect taxpayer return
information, may combine information required with
respect to individual population census tracts into
larger geographic areas.
(5) Definitions.--Any term used in this subsection which is
also used in subchapter Z of chapter 1 of the Internal Revenue
Code of 1986 shall have the meaning given such term under such
subchapter.
(6) Reports on qualified rural opportunity funds.--The
Secretary shall make publicly available, with respect to
qualified rural opportunity funds, separate reports as required
under this subsection, applied--
(A) by substituting ``qualified rural opportunity''
for ``qualified opportunity'' each place it appears,
(B) by substituting a reference to this Act for
``Public Law 115-97'', and
(C) by treating any reference (after the
application of subparagraph (A)) to qualified rural
opportunity zone stock, qualified rural opportunity
zone partnership interest, qualified rural opportunity
zone business, or qualified opportunity zone business
property as stock, interest, business, or property,
respectively, described in subclause (I) or (II), as
the case may be, of section 1400Z-2(b)(2)(B)(vii) of
the Internal Revenue Code of 1986.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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