Modify the rules for investments in qualified opportunity funds

Section 1400Z–1(f) of the Internal Revenue Code of 1986 is amended by striking 10th calendar year and inserting 20th calendar year.

Section 1400Z–2(a)(2)(B) is amended by striking December 31, 2026 and inserting December 31, 2036.

Subparagraph (B) of section 1400Z–2(b)(1) of such Code is amended to read as follows:

(i) December 31, 2026, in the case of an amount invested before the date of the enactment of this clause, and

(ii) December 31, 2036, in the case of an amount invested after the date of the enactment of this clause and before January 1, 2037.

Section 1400Z–2(b)(2)(B) of such Code is amended—

(A) in clause (ii), by adding at the end the following new sentence: Notwithstanding the preceding sentence, if the taxpayer invests in a qualified opportunity fund that holds any asset in qualified opportunity zone property that is a residential rental project, the basis in the taxpayer’s investment shall be increased in accordance with the preceding sentence if, and only if, at least 50 percent of the occupied residential units in the project are occupied, as of the date gain is recognized by reason of subsection (a)(1)(B), by individuals whose income, adjusted for family size, is 100 percent or less of the area median income.,

(B) in clause (iii), by adding at the end the following new sentence: In the case such investment so held is an investment in a qualified opportunity fund that holds any asset in qualified opportunity zone property that is a residential rental project, the preceding sentence shall be applied by substituting 15 percent for 10 percent., and

(C) in clause (iv), by adding at the end the following new sentence: In the case such investment so held is an investment in a qualified opportunity fund that holds any asset in qualified opportunity zone property that is a residential rental project, the preceding sentence shall be applied by substituting 7 percent for 5 percent..

Section 1400Z–2(d) of such Code is amended by adding at the end the following new paragraph:

A residential rental project shall be treated as qualified opportunity zone property if, and only if, the project meets the following requirements:

(A) The project meets the definition of qualified opportunity zone business property in paragraph (2)(D).

(B) At least 30 percent of the occupied residential units in the project are occupied by individuals whose income, adjusted for family size, is 100 percent or less of the area median income during substantially all of the qualified opportunity fund’s holding period for such property.

(C) Rent increases do not exceed 3 percent annually for any of the residential units in the project.

(D) At least 60-day advance notice is provided with respect to any rent increase for a residential unit in the project.

Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act.

The amendment made by subsection (a) shall apply to designations in effect on the date of the enactment of this Act.