What are some detailed regulations?
The greatest flexibility in this area appears to be related to the ability to aggregate certain asset types when looking to meet substantial improvement as well as potentially including the cost of new assets, including tangible personal property, into the substantial improvement test.
If the assets being improved are part of the same census tract, you can take a gross approach to all the buildings or assets for purposes of the substantial improvements. If you have two $1 million buildings, rather than improve both with $1 million of additional investment, the combination of the two only needs to reach $2 million. One could be $500,000, the other $1.5 million.
The flexibility in the final regulations regarding substantial improvement primarily concerns hotel projects and other value-add real estate renovations. Rather than evaluating these projects asset by asset, you can now group the project as a whole and count things like furniture, fixtures, and equipment. toward overall substantial improvement. The change will make projects such as hotel renovations, gut rehab of multi-family housing, and industrial warehouses easier by a good margin.
One of the changes is the determination of the substantial improvement on the aggregate and allowing the consideration of property acquired so the improved property may fulfill its purpose. The regulations provide the example of a hotel that needs furniture and supplies to operate.
DISCLAIMER:the information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal and financial experts prior to participating in any aspect relating to Opportunity Zones. Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.