There have been multiple reports about political favoritism in the designation of opportunity zones, which has prompted calls for investigations by various members of Congress and the introduction of bills requiring more disclosure about investments in opportunity zone funds. One legislator, Rep. Rashida Tlaib, D-Mich., has even introduced a bill that would remove opportunity zones from the U.S. tax code, essentially killing their tax advantages.

In the meantime, the IRS recently finalized regulations for opportunity zone funds that provide more flexibility for investors.

Here are some of the key changes included in the IRS's 544-page document:

• The 180-day window for investing gains from a previous investment begins at the sale date of that investment rather than rather the last day of an investor's tax year.
• Under the new regs, opportunity zone funds can aggregate a  group of two or more buildings located on the same parcel(s) of land in an opportunity zone or a contiguous zone for treatment as a single property in order to satisfy the substantial improvement test, which mandates that improvements double the value of the property — that is, increase the basis by 100%. In previous proposed IRS rules each building had to have its own basis doubled. 
• A shorter vacancy period for properties to qualify for the original use requirement. In addition to the substantial improvement test, property investments in opportunity zone funds can qualify for tax benefits if the original use of a property begins with a fund's investment. Under previous proposed IRS rules, properties vacant for five years met the original use requirement. Now the IRS allows properties that are vacant for a least three years prior to purchase by a qualified opportunity fund or vacant at least one year before the zone was so designated and remained vacant at purchase can qualify to meet the original use property test.  Also qualifying for original use purposes are all the real properties at a brownfield site, including land and structures, so long as improvements are made within a reasonable period of time that meet basic safety standards for human health and the environment. 
• The doubling of the working capital safe harbor provision from 31 months to 62 months for startups operating in a qualified opportunity zone business if certain requirements are met. Investment can receive an extra 24 months to use working capital the zone is in a federally declared disaster area.

"These new regulations provide much-needed clarity for communities and investors alike, and will facilitate stronger levels of investment across a range of local needs in designated communities," said John Lettieri, president and CEO of the Economic Innovation Group, which is credited with developing the idea of opportunity zone funds and selling it to the White House, in a statement. "The final rules include several significant improvements designed to make it easier to use opportunity zones for the purposes Congress intended."

Among those significant improvements are the rules concerning investments in brownfields, and the longer safe harbor provision for startup companies, according to Michael Krueger, an attorney at Newmeyer Dillion who represents investors, developers, fund managers and brokerage firms involved in opportunity zone projects.

As a result, he expects more investments in brownfields, often located in blighted areas, and potentially in tech-related projects that address climate change. The next Tesla or creator of the next electric car battery needs a long lead time, explained Krueger. 

— Related on ThinkAdvisor:

• Opportunity Zones Under Fire in Congress
• Congresswoman Wants to End Opportunity Zone Program
• Opportunity Zone Funds: It's Complicated
• SEC, NASAA Share Guidance on Opportunity Zone Funds
• An Opportunity Zone Fund Checklist for Advisors
• Opportunity Zone Funds: Will They Provide the Impact Investors Expect?