Posted on September 26, 2019
Opportunity Zones provide investors with a Federal Tax Incentive and work to encourage re-investment of unrealized capital gains into designated low-income census tracts known as Opportunity Zones. The initiative is an incentive—not a program—and this distinction is crucial to understanding how Opportunity Zones operate, raising the question: what is government’s role?
The Opportunity Zones initiative can only be leveraged by private investors with capital gains, thus requiring that the investor own equity in the project. Such projects can range from venture investments and real estate development to industrial or impact investing. The investor then chooses to leverage the benefits of the initiative by simply claiming the incentive on their federal tax return. This means that there is no direct approval of Opportunity Zone-qualifying projects by the federal, local or state government. Instead, government should act as a guiding force that coordinates public efforts to assist and promote private success.
Because Opportunity Zones provide a Federal Tax Incentive, there is no “United States Office of Opportunity Zones Approval”; however, the White House has taken the lead on modeling government’s role in the initiative through the establishment of the White House Opportunity and Revitalization Council (WHORC) through an Executive Order signed on December 12, 2018.
Primary goals of the WHORC include:
These goals have allowed WHORC to redesign over 160 federal funding programs to align with Opportunity Zones.
Knox Law Public Strategies has developed a list of five key roles that local governments and economic development agencies can play in the promotion and success of Opportunity Zones in their communities:
The Opportunity Zones Federal Tax Incentive is best utilized when all community partners work together to achieve its success. Although the initiative is not a government program, this does not mean that government is a silent bystander.
In fact, the brilliance of the Opportunity Zones initiative is that it requires both public and private sector synergy to build a community that reflects the input of all its stakeholders—with each stakeholder having specific and important roles to play.