The Opportunity Zone tax incentives introduced in the Tax Cuts and Jobs Act of 2017 (TCJA, P.L. 115-97) received bipartisan praise during a US House Ways and Means Tax Subcommittee field hearing in Erie, Pennsylvania, on 20 May, 2024.

The hearing focused on expanding economic opportunities in the “Rust Belt”.

Despite the accolades, lawmakers and witnesses agreed that the programme could be improved with robust reporting requirements and other modifications.

Opportunity Zones

The Tax Cuts and Jobs Act (TCJA) introduces provisions allowing taxpayers who utilise a “Qualified Opportunity Fund” to invest in economically impoverished areas designated as “Qualified Opportunity Zones”.

This enables them to defer and potentially reduce taxes on previous capital gains rolled over into the fund.

Additionally, it offers the possibility of permanently eliminating taxes on future capital gains from appreciated investments held in the fund for at least 10 years.

The election for investing in an Opportunity Zone is set to expire on 31 December, 2026.

Expired and expiring TCJA provisions

Republicans on the panel also questioned witnesses about the impact on businesses of the phase-out of taxpayer-friendly provisions under the TCJA regarding research expenditures, business interest expense deductions, and 100% bonus depreciation.

Senate Finance Committee Chairman Ron Wyden and Ways and Means Chairman Smith have take initiatives to to reverse these changes made by the TCJA tax law through 2025 alongside their Tax Relief for American Families and Workers Act (H.R. 7024), which was approved in the House in January 2024, but yet to be passed by the Senate.