Designed as an incentive to direct capital to areas experiencing uneven, post-recession economic recovery, Opportunity Zones offer attractive tax benefits for individuals and corporations. Originally introduced in the Investing in Opportunity Act in 2017, Opportunity Zones were thought to promote growth through long-term investments in rural and low-income urban communities throughout the nation to encourage additional private investment.
On March 13, Rachel Reilly, Director of Impact Investing for the Enterprise Community Partners- Mid-Atlantic, joined the Federal City Council to present to trustees about this tax incentive. Opportunity Zones tap into the $2 to $6 trillion market of potential investment capital with unrealized capital gains. Unlike the Low-Income Housing Tax Credit, there is no authorized cap on the amount of capital that could be made available through this type of investment. And unlike other programs, capital will flow purely based on market conditions within a jurisdiction with no state or local government approval. Treasury will release investment guidance by the end of 2018, and it is anticipated that qualified investments can begin to flow into the Opportunity Zones in 2019.
Opportunity Zones are in the process of being defined further through the regulatory process. The U.S. Treasury is working with Governors (or state Chief Executives), who will nominate up to 25 percent of their qualified low-income zones to receive these investments. Up to 5 percent of the state’s nominations can be non-low-income tracts eligible based on contiguity. The U.S. Department of the Treasury will review nominations and certify Opportunity Zones within 30 days of receiving nominations. In the context of D.C., for example, there are 100 Low-Income Communities and 18 eligible Contiguous Tracts. This means that 25 Low-Income communities are eligible for this designation.
Because this program is still new, it remains to be see whether it will have the community-based impact it is expected to have. Cities and local officials will likely play a role in shaping the impact of these investments as the program is implemented.
You can view the potential Opportunity Zones in D.C. and in the country, here.