Report Issued by the Urban Institute Critical of Opportunity Zone Program
The Urban Institute, a nonprofit research organization, has issued a research report entitled, “An Early Assessment of Opportunity Zones for Equitable Development Projects,” that critiques aspects of the Opportunity Zone program enacted as part of the Tax Cuts and Jobs Act in December 2017. This program provides incentives for investors to invest capital gains into Opportunity Zone Funds, which in turn purchase real estate or operating businesses located in identified economically distressed census tracts.
The report addresses nine observations concerning the program, including that the investors for whom the Opportunity Zone program was designed are not the type of investor that typically invests in community development projects and have different investment objectives and timelines than such projects typically require; that the program lacks incentives for community resident or intermediary investment and participation; that while the program was designed to spur job creation, most of the capital invested to date has flowed into real estate which may not throw off substantial economic activity in the community; that the tax benefits of the program promote a 10 year exit strategy that may be difficult to execute and may run counter to the continued economic vitality of the community; and that the tax benefits to be derived from the program may not be high enough to attract investment in community development projects that were not already viable without the opportunity zone investment.
The report also points out strategies for leveraging the opportunity zone program by using other incentives to accomplish successful community development projects and recommends changes to improve the program.
The report can be accessed here.
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