Opportunity Zones incentives, a new community development tool created as part of the December 2017 federal tax reform legislation, have been a focus within the community and economic development circles for several months. Although the incentive launched in July 2018 with the announcement of 8,700 opportunity zones, including Avondale, federal regulations have yet to be finalized.
Beth Robinson, president and CEO of Uptown Consortium (UCI), is a member of Novogradac & Company’s Opportunity Zones Working Group, comprised of investors, developers, community development financial institutions and organizations. As a member, Robinson and her staff participate in monthly conference calls to provide input on opportunity zone regulations to the U.S. Department of Treasury, Internal Revenue Service (IRS), members of Congress and other federal and state agencies.
Robinson joined the Opportunity Zones Working Group to help shape regulations so the incentive can best benefit communities like Avondale. UCI initially recommended Avondale to the governor during the opportunity zone selection process. Robinson hopes that once finalized, opportunity zones incentives can be a valuable tool in helping finance area projects like the Burnet Avenue redevelopment project and the Uptown Innovation Corridor.
“Opportunity zones investments will bring much-needed commercial and community goods and services to areas, will develop or preserve affordable housing and will provide myriad other benefits to low-income communities,” said Gregory Clements, CPA, partner, Novogradac & Company.
Compared to other economic development incentives like New Markets Tax Credits (NMTCs), opportunity zones vary in two key areas. First, opportunity zone investments are self-certified and any eligible tax payer—individuals or corporations— seeking to reduce their tax liabilities can invest in an opportunity fund. Second, opportunity zones incentives are unlimited. NMTCs, on the other hand, are allocated amounts invested through community development entities, like UCI.
These differences provide unique opportunities and challenges for the incentive. According to Clements, the opportunity zones investment could incentivize more development than NMTCs because there is no limit to the incentives. However, since opportunity zones are self-certified, there is no mechanism to steward the capital towards community priorities as community development entities do with NMTCs.
The Treasury Department is currently finalizing the incentive regulations and the IRS is expected to release its second round of regulations in the coming months. As an active member of the Working Group, Robinson will have access to congressional updates on issues as they happen, as well as Novogradac’s analysis of key issues in the opportunity zones incentive.