1. Short title
This Act may be cited as the “COVID-19-Impacted Small Business Opportunity Zone Act”.
COVID-19-Impacted Small Business Opportunity Zone Act
A BILL
To amend the Internal Revenue Code of 1986 to modify the opportunity zone tax incentives.
2. Modification of opportunity zone tax incentives
Small businesses affected by COVID-19 treated as qualified opportunity zone businesses— Section 1400Z–2(d)(3) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
“(C) Certain small businesses affected by COVID-19 treated as qualified opportunity zone businesses
“(i) In general—Subparagraph (A)(i) shall not apply with respect to any qualified small business.
“(ii) Qualified small business—For purposes of this subparagraph, the term “qualified small business” means any small business if such small business has experienced any of the following as a result of the spread of, or of the public’s or any government’s response to, COVID-19—
“(I) supply chain disruptions, including changes in quantity, lead time, delay, or the number of shipments of components; changes in the quality of supplied components; and disruption by reason of compromised payment networks or other technological reasons,
“(II) staffing challenges,
“(III) decrease in sales or customers, or
“(IV) partial or full suspension of business.
“(iii) Small business—For purposes of this subparagraph, the term “small business” means any trade or business if the gross receipts (as determined under the rules of section 448(c)(3), without regard to subparagraph (A) thereof) of such trade or business (when combined with all related trades or businesses) for the relevant taxable year do not exceed $999,999. For purposes of the preceding sentence, a trade or business shall be treated as related if it is a trade or business of the same person or of any person treated as one person under section 448(c)(2). For purposes of this clause, the term “relevant taxable year” means the last taxable year which ends before the date on which the qualified opportunity zone fund acquires the qualified opportunity fund property to which such trade or business relates.
“(iv) Application of subparagraph—Clause (i) shall only apply with respect to qualified opportunity fund property acquired by a qualified opportunity zone fund during the 1-year period beginning on the date of the enactment of this subparagraph.”
Application of capital gains rate for taxable year in which investment is acquired— Section 1400Z–2(b) of such Code is amended by adding at the end the following new paragraph:
“(3) Application of capital gains rates—The rate of tax which applies to gain which is included in income as provided in this subsection shall not exceed the rate applicable to such gain in the taxable year in which the investment was acquired. Proper adjustments shall be made in the application of section 1(h) for the taxable year in which such gain is included in gross income to take into account the preceding sentence.”
Extension of deferral of gain invested in opportunity zones— Section 1400Z–2(b)(1)(B) of such Code is amended to read as follows:
“(B) the date which is 7 years after the date on which such investment was acquired.”
Exemption from tax for investments held for at least 10 years without regard to whether investment consists of reinvested gain— Section 1400Z–2(c) of such Code is amended by striking “any investment” and inserting “any investment in a qualified opportunity fund (without regard to whether such investment is described in subsection (a))”.
Effective dates—
In general— Except as otherwise provided in this subsection, the amendments made by this section shall apply to investments in qualified opportunity funds made after the date of the enactment of this Act.
Small businesses affected by COVID-19 treated as qualified opportunity zone businesses— The amendment made by subsection (a) shall apply to property acquired by qualified opportunity zone funds after the date of the enactment of this Act.