Governors Must Nominate Eligible Census Tracts as Opportunity Zones by March 21
The Opportunity Zones Program is the first new community development tax incentive program enacted since the Clinton administration.
The Opportunity Zones Program provides an opportunity for mainstream private investors to support businesses and distressed communities.
The expectation is that Opportunity Funds, the new class of investment vehicles authorized to aggregate and deploy private investment into Opportunity Zones, will ease the execution of “impact investments” for investors.
It is expected that tax benefits derived from these investments will increase participation in the Opportunity Zones Program.
The Tax Cuts and Jobs Act authorized Opportunity Zones allows investors to defer paying capital gains taxes by placing their unrealized capital gains in Opportunity Funds. Opportunity Funds are a new investment vehicle that channels funds to distressed communities.
In an article in Affordable Housing Finance, Lori Chatman, president of Enterprise Community Loan Fund, provides an overview of the Opportunity Zones designation process and explains why the next several months will be critical to the impact of this new program.
Governors must nominate eligible census tracts or request a 30-day extension from the U.S. Department of the Treasury by Wednesday, March 21, 2018 in order to qualify for Opportunity Zones investments. If a governor does not nominate census tracts, the state essentially opts out of benefiting from this incentive over the next ten years.
Chatman notes that it is important for governors to think critically about which census tracts they nominate, and to target tracts with the capacity to receive an influx of private capital in a way that benefits communities and residents.
Enterprise has developed an online mapping tool that can guide the selection of tracts in each state by providing additional information about federal programs and designations that currently exist in each tract.
For example, the tool shows Choice Neighborhoods, Promise Zones, and New Markets Tax Credit developments in each tract, offering an overview of where Opportunity Zone investments could be layered on existing investments for maximum benefit.
The coming weeks will be critical for advocates and local stakeholders to weigh in with Treasury as the rules and regulations around this new tax benefit are implemented.
The concept was introduced in the Investing in Opportunity Act (IIOA) during the 114th Congress and reintroduced in the 115th Congress by Senators Tim Scott (R-S.C.) and Cory Booker (D-N.J.) and Congressmen Pat Tiberi (R-Ohio) and Ron Kind (D-Wis.), gaining nearly 100 congressional cosponsors in 2017.