SECTION 2. BACKGROUND

.01 Enactment . Section 13823 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115–97, which was enacted on December 22, 2017, amended the Code by adding §§ 1400Z–1 and 1400Z–2 to the Code.

.02 Tax incentives . Section 1400Z–2 of the Code allows the temporary deferral of inclusion in gross income for certain realized gains to the extent that corresponding amounts are timely invested in a qualified opportunity fund. Investments in a qualified opportunity fund may also be eligible for additional tax benefits.

.03 Qualified Opportunity Fund . Section 1400Z–2(d)(1) of the Code provides that a qualified opportunity fund is an investment vehicle that is organized as a partnership or a corporation for the purpose of investing in Qualified Opportunity Zone property.

.04 Designations, in general . Section 1400Z–1 of the Code allows the Chief Executive Officer (CEO) of each State to nominate a limited number of population

census tracts to be designated as Qualified Opportunity Zones (QOZs). For purposes of §§ 1400Z–1 and 1400Z–2 and this revenue procedure, the term “State” means any State, any possession of the United States, and the District of Columbia. See §§ 1400Z–1(c)(3) and 7701(a)(10) of the Code. Under § 1400Z–1(c)(1), a population census tract is eligible for designation as a QOZ if it satisfies the definition of “low-income community” (LIC) in § 45D(e) of the Code.

.05 Tracts Contiguous with LICs . In addition, under § 1400Z–1(e) of the Code, a tract that is not an LIC is eligible for designation if both of the following conditions are met:

(1) The non-LIC tract is contiguous

with an LIC that is designated as a QOZ (the contiguous LIC QOZ need not be in the same State.); and (2) The median family income of the

non-LIC tract does not exceed 125 percent of the median family income of that contiguous LIC QOZ. .06 Determination Period and Exten- sion . Pursuant to § 1400Z–1(b)(1)(A) and (c)(2)(B) of the Code, the CEO of the State in which a tract is located may nominate the tract to be a QOZ, and any such nomination must be made no later than March 21, 2018. Under § 1400Z–1(b)(2), however, the State CEO may request, and receive, a 30-day extension of this deadline.

.07 Consideration Period and Exten- sion . In general, not later than the end of a 30-day period beginning on the date that the Secretary of the Treasury (Secretary) receives notice of a nomination, the Secretary may certify the nomination and designate the nominated tract as a QOZ. Under § 1400Z–1(b)(2) of the Code, however, the State CEO may request, and receive, a 30-day extension of the Secretary’s deadline.

.08 Qualified Opportunity Zone . Section 1400Z–1 of the Code defines a QOZ as any population census tract (either a nominated LIC or a nominated non-LIC, contiguous census tract) that is designated as a QOZ.

.09 Number of Designations . (1) In general, § 1400Z–1(d)(1) of the Code provides that the number of population census tracts in a State that may be designated as QOZs may not exceed 25

Bulletin No. 2018–9 383 February 26, 2018