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Opportunity Zones disappoint.

July 23, 2020 by Small Change


“A new tax break that President Trump frequently touts as a boon to black Americans and hard-hit communities is spurring relatively little job creation while disproportionately helping high-profit real estate projects and not small businesses, an extensive new study by the Urban Institute has found” writes Jim Tankersley for The New York Times.

Created as an economic development tool, the federal Opportunity Zone incentive was part of the Tax Cuts and Jobs of Act of 2017. The intention was to promote equitable growth in underserved communities, many of which are predominantly Black neighborhoods that struggle to attract investment and business.

Opportunity Zones provided 3 tax benefits for investors:

  • For investments held for at least 10 years, investors pay no taxes on capital gains made through their investment in Opportunity Funds.
  • For capital gains placed in Opportunity Funds for five years or more, investors’ basis on the original investment is increased 10 percent. Or for seven years, 15 percent.
  • Investors can place existing assets with accumulated capital gains into Opportunity Funds. Those capital gains are not taxed until the end of 2026 or when the asset is disposed of.

In the first two years, as the rules became clearer, developers and investors began to take part and Opportunity Zones began to gain traction. But have the investments been reaching projects which benefit those underserved low- and moderate-income communities?

A new study has been released based on interviews with 70 stakeholders across the country. The researchers found that Opportunity Zones are providing the largest benefits to high-return projects, those which are rarely positioned to provide equitable development, and that the structure of the incentive makes it more difficult to develop projects with community benefit where they are most needed.

 “Although there are compelling examples of community benefit,” the researchers conclude, “the incentive as a whole is not living up to its economic and community development goals.”

Read the original article here.


Image by Cameron Blaylock


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