The U.S. Treasury Department and Internal Revenue Service have released additional regulatory guidance regarding investment in Qualified Opportunity Zones, which were established as part of the Tax Cuts and Jobs Act of 2017.

The updated IRS guidance is “providing a lot of clarity,” says Derek Uldricks, head of capital formation for the Virtua Opportunity Zone Fund, sponsored by Virtua Partners. The fund, which launched in June, is among the first of its kind.

The new guidance clarifies gains must be capital gains to be eligible for tax deferral, explains Uldricks, and “depreciation recapture is not eligible.”

Partnership structures will be able to take advantage of the program. A statement from the Treasury Department and IRS notes: “In the case of a capital gain experienced by a partnership, the rules allow either a partnership or its partners to elect deferral. Similar rules apply to other pass-through entities, such as S corporations and their share