Summary
Created in 2017, Opportunity Zones (OZs) are designated, low-income census tracts where qualifying investments are eligible for reduced capital gains taxes. By channeling investment where it is needed, OZs help stimulate jobs, generate economic opportunity, and improve the built environment in low-income communities. The decentralized design of OZs allows more investors and stakeholders to participate in the market and invest in these projects.
This year, the renewal and reform of the OZ tax incentives is expected to be a major topic of discussion as Congress considers the extension of the Tax Cuts and Jobs Act of 2017. RER has advocated for a long-term extension of the OZ incentives, as well as additional reforms to scale their impact and improve their effectiveness.
Tax legislation passed by the House Ways and Means Committee in May would extend OZ incentives through 2033, create new benefits for rural OZs, call for a new round of OZ census tract designations, and make other reforms to the provisions.
Key Takeaways
In their short tenure, OZs have created jobs and spurred billions of dollars of new investment in economically struggling communities across the country.
Opportunity Funds finance affordable, workforce, and senior housing; grocery-anchored retail centers; and commercial buildings that create spaces for new businesses and jobs.
In 2020, the White House Council of Economic Advisers estimated that the Opportunity Funds had raised $75 billion in private capital in the first two years following the incentives’ enactment, including $52 billion that otherwise would not have been raised. The council projected this capital could lift one million people out of poverty in OZs by 11 percent.
Despite major hurdles such as COVID-19 and high interest rates, more recent estimates suggest OZs have attracted over $120 billion in capital.
Today, 72 percent of U.S. counties contain at least one OZ, and 32 million people live in the 8,764 OZ-designated census tracts.
See the full fact sheet.
Provide a Long-Term Extension of OZ Deadlines: Congress should ensure that OZs continue to act as a catalyst for economic development in struggling communities by passing legislation that extends OZ deadlines.
Supplement the Extension of OZs with Well-Designed Reforms: Congress should also continue working on improvements to the OZ tax incentives to boost their scale and impact. RER encourages Congress to enact the following reforms:
Tax Cuts and Jobs Act of 2017 (TCJA)