Opportunity Zones Targeted for Some of NJ’s Urban Areas that Most Need Relief from Affordable Housing Crisis
The proposed regulations offer investors and fund managers technical guidance on structuring Opportunity Funds, including clarification that:
- investors may only receive the tax benefit on capital gains; land value is not included in calculating minimum project costs,
- providing a more flexible threshold for projects such as affordable housing preservation; and
- 70 percent of a business’ tangible property must be within the designated Opportunity Zone to qualify for the tax benefit.
The proposed rule notes that the Treasury Department and IRS are working on additional published guidance, to be released in the “near future,” that will include information-reporting requirements.
New Jersey already has 169 Opportunity Zones designated by Governor Phil Murphy. The Opportunity Zones are located in 75 municipalities spread over each of New Jersey’s 21 counties. The Opportunity Zones include parts of almost all of New Jersey’s major cities.
New Jersey faces an affordable housing crisis and Opportunity Zones are targeted to some of the areas that most need relief.
- regulations should be designed to promote the transparency of Opportunity Fund activities, and to ensure accountability and prevent abuse.
- This should include collecting transaction-level data from Opportunity Funds so that the public and Congress can evaluate the efficacy of the Opportunity Zones tax incentive.
- Congress and the Treasury Department should also enact federal guidelines to explicitly prevent Opportunity Fund investments that would disproportionately harm low-income residents and local businesses.
An analysis by Real Capital Analytics found that sales of development sites in Opportunity Zones nationwide have increased 80 percent in the first three quarters of 2018, and owners in some Opportunity Zones have doubled their asking prices, expecting higher demand.
Enterprise Communities encourages the submission of comments to the IRS by the December 28 deadline to identify ways to improve the regulations and prevent abuse of this economic development tool.
Enterprise plans to continue playing a central role in the implementation of Opportunity Zones. Its next step is to work with state and local governments to foster inclusive economic growth that results in a direct and sustained community benefit to those we seek to serve.