I
119THCONGRESS
1
STSESSION H. R. 2292
To amend the Internal Revenue Code of 1986 to establish special rules
for capital gains invested in brownfield and superfund sites.
IN THE HOUSE OF REPRESENTATIVES
MARCH24, 2025
Mr. E
DWARDS(for himself and Ms. CROCKETT) introduced the following bill;
which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to establish
special rules for capital gains invested in brownfield and
superfund sites.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Economic Opportunity 4
for Distressed Communities Act’’. 5
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SEC. 2. ESTABLISHMENT OF SPECIAL RULES FOR CAPITAL 1
GAINS INVESTED IN DISTRESSED OPPOR-2
TUNITY ZONES. 3
(a) I
NGENERAL.—Subchapter Z of chapter 1 of the 4
Internal Revenue Code of 1986 is amended by adding at 5
the end the following new section: 6
‘‘SEC. 1400Z–3. SPECIAL RULES FOR CAPITAL GAINS IN-7
VESTED IN DISTRESSED OPPORTUNITY 8
ZONES. 9
‘‘(a) I
NGENERAL.— 10
‘‘(1) T
REATMENT OF GAINS .—In the case of 11
capital gains from the sale to, or exchange with, an 12
unrelated person of any property held by the tax-13
payer, at the election of the taxpayer— 14
‘‘(A) gross income for the taxable year 15
shall not include so much of such gain as does 16
not exceed the aggregate amount invested by 17
the taxpayer in a qualified distressed oppor-18
tunity fund during the 180-day period begin-19
ning on the date of such sale or exchange, 20
‘‘(B) the amount of gain excluded by sub-21
paragraph (A) shall be included in gross income 22
as provided by subsection (b), and 23
‘‘(C) subsection (c) shall apply. 24
‘‘(2) E
LECTION.—No election may be made 25
under paragraph (1)— 26
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‘‘(A) with respect to a sale or exchange if 1
an election previously made with respect to such 2
sale or exchange is in effect, or 3
‘‘(B) with respect to any sale or exchange 4
after December 31, 2033. 5
‘‘(b) D
EFERRAL OFGAININVESTED INQUALIFIED 6
D
ISTRESSEDOPPORTUNITYZONEPROPERTY.— 7
‘‘(1) Y
EAR OF INCLUSION.—Gain to which sub-8
section (a)(1)(B) applies shall be included in income 9
in the taxable year which includes the earlier of— 10
‘‘(A) the date on which such investment is 11
sold or exchanged, or 12
‘‘(B) December 31, 2033. 13
‘‘(2) A
MOUNT INCLUDIBLE.— 14
‘‘(A) I
N GENERAL.—The amount of gain 15
included in gross income under subsection 16
(a)(1)(A) shall be the excess of— 17
‘‘(i) the lesser of the amount of gain 18
excluded under paragraph (1) or the fair 19
market value of the investment as deter-20
mined as of the date described in para-21
graph (1), over 22
‘‘(ii) the taxpayer’s basis in the in-23
vestment. 24
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‘‘(B) DETERMINATION OF BASIS QUALI -1
FIED DISTRESSED OPPORTUNITY ZONE PROP -2
ERTY.— 3
‘‘(i) I
N GENERAL.—Except as other-4
wise provided in this clause or subsection 5
(c), the taxpayer’s basis in the investment 6
shall be zero. 7
‘‘(ii) I
NCREASE FOR GAIN RECOG -8
NIZED UNDER SUBSECTION (a)(1)(B).— 9
The basis in the investment shall be in-10
creased by the amount of gain recognized 11
by reason of subsection (a)(1)(B) with re-12
spect to such property. 13
‘‘(iii) I
NVESTMENTS HELD FOR 5 14
YEARS.—In the case of any investment 15
held for at least 5 years, the basis of such 16
investment shall be increased by an 17
amount equal to 10 percent of the amount 18
of gain deferred by reason of subsection 19
(a)(1)(A). 20
‘‘(iv) I
NVESTMENTS HELD FOR 7 21
YEARS.—In the case of any investment 22
held by the taxpayer for at least 7 years, 23
in addition to any adjustment made under 24
clause (iii), the basis of such property shall 25
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be increased by an amount equal to 5 per-1
cent of the amount of gain deferred by rea-2
son of subsection (a)(1)(A). 3
‘‘(c) S
PECIALRULE FORINVESTMENTSHELD FOR 4
ATLEAST10 YEARS.—In the case of any investment held 5
by the taxpayer for at least 10 years and with respect to 6
which the taxpayer makes an election under this sub-7
section, the basis of such property shall be equal to the 8
fair market value of such investment on the date that the 9
investment is sold or exchanged. 10
‘‘(d) Q
UALIFIED DISTRESSED OPPORTUNITY 11
F
UND.—For purposes of this section— 12
‘‘(1) I
N GENERAL.—The term ‘qualified dis-13
tressed opportunity fund’ means any investment ve-14
hicle which is organized as a corporation or a part-15
nership for the purpose of investing in qualified dis-16
tressed opportunity zone property (other than an-17
other qualified distressed opportunity fund) that 18
holds at least 90 percent of its assets in qualified 19
distressed opportunity zone property, determined by 20
the average of the percentage of qualified distressed 21
opportunity zone property held in the fund as meas-22
ured— 23
‘‘(A) on the last day of the first 6-month 24
period of the taxable year of the fund, and 25
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‘‘(B) on the last day of the taxable year of 1
the fund. 2
‘‘(2) Q
UALIFIED DISTRESSED OPPORTUNITY 3
ZONE PROPERTY.— 4
‘‘(A) I
N GENERAL.—The term ‘qualified 5
distressed opportunity zone property’ means 6
property which is— 7
‘‘(i) qualified distressed opportunity 8
zone stock, 9
‘‘(ii) qualified distressed opportunity 10
zone partnership interest, or 11
‘‘(iii) qualified distressed opportunity 12
zone business property. 13
‘‘(B) Q
UALIFIED DISTRESSED OPPOR -14
TUNITY ZONE STOCK.— 15
‘‘(i) I
N GENERAL.—Except as pro-16
vided in clause (ii), the term ‘qualified dis-17
tressed opportunity zone stock’ means any 18
stock in a domestic corporation if— 19
‘‘(I) such stock is acquired by the 20
qualified distressed opportunity fund 21
after December 31, 2025, at its origi-22
nal issue (directly or through an un-23
derwriter) from the corporation solely 24
in exchange for cash, 25
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‘‘(II) as of the time such stock 1
was issued, such corporation was a 2
qualified distressed opportunity zone 3
business (or, in the case of a new cor-4
poration, such corporation was being 5
organized for purposes of being a 6
qualified distressed opportunity zone 7
business), and 8
‘‘(III) during substantially all of 9
the qualified distressed opportunity 10
fund’s holding period for such stock, 11
such corporation qualified as a quali-12
fied distressed opportunity zone busi-13
ness. 14
‘‘(ii) R
EDEMPTIONS.—A rule similar 15
to the rule of section 1202(c)(3) shall 16
apply for purposes of this paragraph. 17
‘‘(C) Q
UALIFIED DISTRESSED OPPOR -18
TUNITY ZONE PARTNERSHIP INTEREST .—The 19
term ‘qualified distressed opportunity zone 20
partnership interest’ means any capital or prof-21
its interest in a domestic partnership if— 22
‘‘(i) such interest is acquired by the 23
qualified distressed opportunity fund after 24
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December 31, 2025, from the partnership 1
solely in exchange for cash, 2
‘‘(ii) as of the time such interest was 3
acquired, such partnership was a qualified 4
distressed opportunity zone business (or, in 5
the case of a new partnership, such part-6
nership was being organized for purposes 7
of being a qualified distressed opportunity 8
zone business), and 9
‘‘(iii) during substantially all of the 10
qualified distressed opportunity fund’s 11
holding period for such interest, such part-12
nership qualified as a qualified distressed 13
opportunity zone business. 14
‘‘(D) Q
UALIFIED DISTRESSED OPPOR -15
TUNITY ZONE BUSINESS PROPERTY .— 16
‘‘(i) I
N GENERAL.—The term ‘quali-17
fied distressed opportunity zone business 18
property’ means tangible property used in 19
a trade or business of the qualified dis-20
tressed opportunity fund if— 21
‘‘(I) such property was acquired 22
by the qualified distressed opportunity 23
fund by purchase (as defined in sec-24
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tion 179(d)(2)) after December 31, 1
2025, 2
‘‘(II) the original use of such 3
property in the qualified distressed 4
opportunity zone commences with the 5
qualified distressed opportunity fund 6
or the qualified distressed opportunity 7
fund substantially improves the prop-8
erty, and 9
‘‘(III) during substantially all of 10
the qualified distressed opportunity 11
fund’s holding period for such prop-12
erty, substantially all of the use of 13
such property was in a qualified dis-14
tressed opportunity zone. 15
‘‘(ii) S
UBSTANTIAL IMPROVEMENT .— 16
For purposes of subparagraph (A)(ii), 17
property shall be treated as substantially 18
improved by the qualified distressed oppor-19
tunity fund only if, during any 30-month 20
period beginning after the date of acquisi-21
tion of such property, additions to basis 22
with respect to such property in the hands 23
of the qualified distressed opportunity fund 24
exceed an amount equal to the adjusted 25
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basis of such property at the beginning of 1
such 30-month period in the hands of the 2
qualified distressed opportunity fund. 3
‘‘(iii) R
ELATED PARTY .—For pur-4
poses of subparagraph (A)(i), the related 5
person rule of section 179(d)(2) shall be 6
applied pursuant to subsection (e)(2) in 7
lieu of the application of such rule in sec-8
tion 179(d)(2)(A). 9
‘‘(3) Q
UALIFIED DISTRESSED OPPORTUNITY 10
ZONE BUSINESS.— 11
‘‘(A) I
N GENERAL.—The term ‘qualified 12
distressed opportunity zone business’ means a 13
trade or business— 14
‘‘(i) in which substantially all of the 15
tangible property owned or leased by the 16
taxpayer is qualified distressed opportunity 17
zone business property (determined by sub-18
stituting ‘qualified distressed opportunity 19
zone business’ for ‘qualified distressed op-20
portunity fund’ each place it appears in 21
subparagraph (D)), 22
‘‘(ii) which satisfies the requirements 23
of paragraphs (2), (4), and (8) of section 24
1397C(b), and 25
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‘‘(iii) which is not described in section 1
144(c)(6)(B). 2
‘‘(B) S
PECIAL RULE.—For purposes of 3
subparagraph (A), tangible property that ceases 4
to be a qualified distressed opportunity zone 5
business property shall continue to be treated 6
as a qualified distressed opportunity zone busi-7
ness property for the lesser of— 8
‘‘(i) 5 years after the date on which 9
such tangible property ceases to be so 10
qualified, or 11
‘‘(ii) the date on which such tangible 12
property is no longer held by the qualified 13
distressed opportunity zone business. 14
‘‘(4) Q
UALIFIED DISTRESSED OPPORTUNITY 15
ZONE.—The term ‘qualified distressed opportunity 16
zone’ means— 17
‘‘(A) a brownfield site (as defined in sec-18
tion 101(39) of the Comprehensive Environ-19
mental Response, Compensation, and Liability 20
Act of 1980), or 21
‘‘(B) a facility that is included on the Na-22
tional Priorities List developed by the President 23
in accordance with section 105(a)(8)(B) of the 24
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Comprehensive Environmental Response, Com-1
pensation, and Liability Act of 1980. 2
‘‘(e) A
PPLICABLERULES.— 3
‘‘(1) T
REATMENT OF INVESTMENTS WITH 4
MIXED FUNDS.—In the case of any investment in a 5
qualified distressed opportunity fund only a portion 6
of which consists of investments of gain to which an 7
election under subsection (a) is in effect— 8
‘‘(A) such investment shall be treated as 2 9
separate investments, consisting of— 10
‘‘(i) one investment that only includes 11
amounts to which the election under sub-12
section (a) applies, and 13
‘‘(ii) a separate investment consisting 14
of other amounts, and 15
‘‘(B) subsections (a), (b), and (c) shall 16
only apply to the investment described in sub-17
paragraph (A)(i). 18
‘‘(2) R
ELATED PERSONS.—For purposes of this 19
section, persons are related to each other if such 20
persons are described in section 267(b) or 707(b)(1), 21
determined by substituting ‘20 percent’ for ‘50 per-22
cent’ each place it occurs in such sections. 23
‘‘(3) D
ECEDENTS.—In the case of a decedent, 24
amounts recognized under this section shall, if not 25
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properly includible in the gross income of the dece-1
dent, be included in gross income as provided by sec-2
tion 691. 3
‘‘(4) R
EGULATIONS.—The Secretary shall pre-4
scribe such regulations as may be necessary or ap-5
propriate to carry out the purposes of this section, 6
including— 7
‘‘(A) rules for the certification of qualified 8
distressed opportunity funds for the purposes of 9
this section, 10
‘‘(B) rules to ensure a qualified distressed 11
opportunity fund has a reasonable period of 12
time to reinvest the return of capital from in-13
vestments in qualified distressed opportunity 14
zone stock and qualified distressed opportunity 15
zone partnership interests, and to reinvest pro-16
ceeds received from the sale or disposition of 17
qualified distressed opportunity zone property, 18
and 19
‘‘(C) rules to prevent abuse. 20
‘‘(f) F
AILURE OFQUALIFIEDDISTRESSEDOPPOR-21
TUNITYFUNDTOMAINTAININVESTMENTSTANDARD.— 22
‘‘(1) I
N GENERAL.—If a qualified distressed op-23
portunity fund fails to meet the 90-percent require-24
ment of subsection (d)(1), the qualified distressed 25
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opportunity fund shall pay a penalty for each month 1
it fails to meet the requirement in an amount equal 2
to the product of— 3
‘‘(A) the excess of— 4
‘‘(i) the amount equal to 90 percent of 5
its aggregate assets, over 6
‘‘(ii) the aggregate amount of quali-7
fied distressed opportunity zone property 8
held by the fund, multiplied by 9
‘‘(B) the underpayment rate established 10
under section 6621(a)(2) for such month. 11
‘‘(2) S
PECIAL RULE FOR PARTNERSHIPS .—In 12
the case that the qualified distressed opportunity 13
fund is a partnership, the penalty imposed by para-14
graph (1) shall be taken int account proportionately 15
as part of the distributive share of each partner of 16
the partnership. 17
‘‘(3) R
EASONABLE CAUSE EXCEPTION .—No 18
penalty shall be imposed under this subsection with 19
respect to any failure if it is shown that such failure 20
is due to reasonable cause.’’. 21
(b) C
LERICALAMENDMENT.—The table of sections 22
for subchapter Z of chapter 1 is amended by adding at 23
the end the following new item: 24
‘‘Sec. 1400Z–3. Special rules for capital gains invested in distressed oppor-
tunity zones.’’.
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(c) EFFECTIVEDATE.—The amendments made by 1
this section shall apply to amounts invested after the date 2
of the enactment of this Act. 3
Æ
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