Cadwalader attorneys analyzed proposed regulations, issued on October 19, 2018 by the IRS and U.S. Treasury Department ("Treasury"), relating to the new Opportunity Zone program. The Opportunity Zone program is intended to encourage investments in economically distressed qualified opportunity zones ("QOZs"). The proposed regulations would allow taxpayers to defer and, in some cases, reduce or eliminate tax on capital gains if they reinvest their gains within 180 days in qualified opportunity funds that, in turn, generally are required to invest at least 90 percent of their assets in (i) certain business property located in a QOZ and/or (ii) equity in certain entities that hold such business property.

As described more fully in the Cadwalader memorandum, although the proposed regulations offer helpful guidance on several issues relating to the Opportunity Zone program, a number of questions remain unanswered. The preamble to the proposed regulations indicates that the IRS and the Treasury intend to issue additional guidance, including additional proposed regulations, in the near future.

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