U.S. Senators Todd Young (R-Ind.), Cory Booker (D-NJ), and Tim Scott (R-SC) introduced the Opportunity Zones Transparency, Extension, and Improvement Act to reform Opportunity Zones, the tax incentive for individuals who reinvest unrealized capital gains into high-impact projects in underserved communities.
“The creation of the Opportunity Zones initiative in the 2017 tax reform law has succeeded in attracting capital and investments to historically distressed communities. They serve as a critical tool to create jobs, revitalize neighborhoods, and lift Hoosiers out of poverty, which is why I am proud to help introduce the Opportunity Zones Transparency, Extension, and Improvement Act. This bipartisan legislation will better optimize Opportunity Zone investment in neighborhoods and communities across Indiana while strengthening transparency and reporting metrics to improve on the initiative’s success,” said Senator Young.
“The Opportunity Zone incentive has the potential to unleash much-needed economic growth in high poverty communities across the country – communities that investors too often overlook. But without robust guardrails in place, the incentive could be undermined or abused by those who aren’t committed to uplifting rural and urban communities across the country,” said Senator Booker. “I am proud to introduce this legislation with Senator Scott to help restore the original promise of opportunity zones by steering private capital to reinvest in underserved communities that have been historically left behind and working to level the economic playing field.”
“The Opportunity Zone program represents the good that leaders can do for communities across the country when we work together toward common sense solutions,” said Senator Scott. “Independent reporting shows that investments in Opportunity Zones are making a huge impact across the country, with billions of dollars flowing into impoverished neighborhoods. I am glad to build on that success with this legislation to make the program stronger, so that we can ensure this incentive is benefitting the Americans who need it most.”
This bipartisan legislation would improve Opportunity Zones by:
- Reinstating and expanding the reporting requirements that were present in the Investing in Opportunity Act (IIOA), the original stand-alone legislation that created Opportunity Zones, but were stripped out in the 2017 Tax Cuts and Jobs Act due to procedural rules.
- Ending Opportunity Zones that are not impoverished. While the vast majority of Opportunity Zones are truly impoverished areas, the legislation would sunset a small percentage of Opportunity Zone designations for tracts with a median family income at or above 130 percent of the national median family income. States would be able to designate a new tract in high-need communities for every tract sunsetted under this provision.
- Creating pathways for smaller-dollar impact investments by allowing Qualified Opportunity Funds (QOFs) to be organized as a “fund of funds” that may invest in other QOFs, providing smaller communities and projects with the financing they need.
- Providing operating support and technical assistance to high-poverty and underserved communities through a State and Community Dynamism Fund. Flexible grants will help states drive private and public capital to underserved businesses and communities.
- Extending the tax incentive for two years in order to facilitate continued investment. It took the Treasury Department nearly two years to issue final regulations governing Opportunity Zones, during which time many investors and stakeholders stayed on the sidelines awaiting clear rules for the policy. Extending the policy by an equal amount of time will help investors and communities fully use the tool as Congress intended — which is especially important now with the economy in recovery from the impacts of the COVID-19 pandemic.
Representatives Jackie Walorski (R-Ind.), Terri Sewell (D-Ala.), and Dan Kildee (D-Mich.) co-sponsored the legislation in the House.
The full text of the legislation can be viewed here.
Quotes in support of the legislation can be viewed below:
John Lettieri, President and CEO, Economic Innovation Group:
“Supporting economic growth in low-income communities remains an urgent challenge as the country recovers from the severe disruption of the pandemic. One powerful way to do that is to strengthen the Opportunity Zones incentive, which has proven to be an effective tool for encouraging investment in struggling areas throughout the country,” said John Lettieri, President and CEO of the Economic Innovation Group. “The Opportunity Zones Transparency, Extension, and Improvement Act would enhance the policy on multiple fronts, including by enacting careful reporting and measurement standards, strengthening the incentive to draw in greater investment, creating new ways to attract funding for high-impact activities, and refining the map of designated communities to better align with the intent of the law. EIG applauds the bill’s sponsors for their thoughtful, bipartisan leadership in bringing this important legislation to fruition.”
Rick Wade, Senior Vice President, U.S. Chamber of Commerce:
“The Opportunity Zone program is a positive, compelling example of government and the private sector working together to solve our nation’s challenges. Investments made possible through the Opportunity Zone program will help underserved communities struggling to bounce back from pandemic-induced economic hardships. The U.S. Chamber of Commerce is proud to support this bipartisan legislation that ensures Opportunity Zone financing reaches the areas of our country that need it the most and expands the reach of a public-private partnership on track to decrease the poverty rate by 11 percent,” said Rick Wade, Senior Vice President at the U.S. Chamber of Commerce
Katie Kramer, Vice President, Council of Development Finance Agencies:
“The Council of Development Finance Agencies is grateful to Congress for their efforts to introduce important reforms to Opportunity Zones. The State and Community Dynamism Fund is critically needed at the local levels to fully deploy comprehensive OZ strategies in disinvested communities. We stand ready to support the implementation ofthe Opportunity Zones Transparency, Extension, and Improvement Act.”