Opportunity Zones

A new national community investment tool that connects private capital with low-income communities across America

The State of Socioeconomic Need and Community Change in Opportunity Zones

HISTORY OF OPPORTUNITY ZONES: 

Opportunity Zones were conceived in the midst of a deeply uneven recovery that followed the Great Recession and designed to help meet the needs of communities traditionally deprived of investment dollars. The incentive is structured in a way that encourages investors to redeploy capital gains from successful investments into new, long-term investments in the kinds of struggling communities that they would normally overlook.

The concept of Opportunity Zones was originally outlined in a 2015 paper, “Unlocking Private Capital to Facilitate Economic Growth in Distressed Areas,” co-authored by a bipartisan pair of economists, Kevin Hassett and Jared Bernstein. The policy as we know it today is based on the bipartisan Investing in Opportunity Act, which was championed by Senators Tim Scott (R-SC) and Cory Booker (D-NJ) and Representatives Pat Tiberi (R-OH) and Ron Kind (D-WI), who led a regionally and politically diverse coalition of nearly 100 congressional cosponsors in the House and Senate. The bill was first introduced in 2016 in the 114th Congress and reintroduced in 2017 in the 115th Congress. 

After the policy was enacted in 2017 as part of the Tax Cuts and Jobs Act, governors formally nominated Opportunity Zones in their respective states and territories. The Treasury Department certified the national map of Opportunity Zones designations in June 2018, and the IRS promulgated final regulations governing the use of the incentives in December 2019. 

WHAT ARE OPPORTUNITY ZONES?

Opportunity Zones are low-income census tracts nominated by governors and certified by the U.S. Department of the Treasury into which investors can now make qualifying investments into new projects and enterprises in exchange for certain federal capital gains tax reductions. There are over 8,700 Opportunity Zones in every state and territory. At the time of designation, 97.4 percent of these communities qualified for OZ status according to the Treasury Department’s “low-income community” (LIC) standard, while 2.6 percent qualified under the law’s provision allowing tracts adjacent to an LIC to receive designation under certain circumstances. Fully 71 percent of Opportunity Zones communities met Treasury’s “severely distressed” definition.

WHAT ARE OPPORTUNITY FUNDS?

A Qualified Opportunity Fund (QOF) is any private investment vehicle organized as a corporation or partnership with the specific purpose of investing in Opportunity Zones. All qualifying investments must be made through QOFs in order to be eligible for the tax incentive. QOFs must register with the Internal Revenue Service and invest at least 90 percent of their capital in qualifying investments inside Opportunity Zones communities. 

HOW DOES IT WORK?

U.S. investors currently hold trillions of dollars in unrealized capital gains  in stocks and mutual funds alone— a significant untapped resource for economic development. Opportunity Zones offer investors three specific incentives for cashing out of these investments and putting their capital gains to work supporting the economic development of low-income communities.

  • The taxes due on any capital gains placed into an Opportunity Fund may be deferred until December 31, 2026. 
  • Investors who keep their money in an Opportunity Fund for five years receive a 10 percent step-up in basis on that original investment and an additional 5 percent after seven years. 
  • Investors who hold their investments in Opportunity Zones for at least 10 years face no capital gains taxes on the new investments when they sell them.

For a thorough overview and analysis of the benefits of Opportunity Zones investment, see EIG’s Opportunity Zones Fact Sheet.

Read more about why we need new economic development tools targeted at empowering economically distressed communities:

  1. 50 million Americans live in economically distressed communities. These places encompass 11 percent of the country’s white population but 35 percent of its Black and 37 percent of its Native populations. 
  2.  The uneven recovery is leaving too many communities behind. Distressed zip codes contain fewer jobs today than they did in the year 2000. Meanwhile, prosperous zip codes captured 62 percent of total U.S. job growth from 2000 to 2018.
  3. Two-thirds of metropolitan neighborhoods that were high poverty in 1980 were still high poverty in 2018. Poverty has become persistent for thousands of neighborhoods, and very few once-poor places have successfully turned around.
Previous Testimonial

Creating a stronger, fairer New Jersey begins with expanding opportunity equally across all communities; the Opportunity Zone Program will be a vital resource in stimulating long-term economic growth and investment in cities and towns that need it most, and more importantly, in generating economic opportunities for our residents.

Phil Murphy

Governor of New Jersey

We focused on local, regional, and state priorities, as well as Virginia’s diverse geography and economic opportunities, to strategically select a balance of zones that align with other state and local economic development and revitalization efforts. My administration is committed to maximizing this important federal tool to strengthen our local and state economic development efforts and ensure Virginia is at the forefront of attracting new Opportunity fund investments.

Ralph Northam

Governor of Virginia

Opportunity Zones are an exciting new tool for building economic development in underserved communities. These grants will help guide us as we implement the program to maximize the benefits of job creation and neighborhood improvement in the most vulnerable areas of our city.

Keisha Lance-Bottoms

Mayor of Atlanta, Georgia

My administration believes that Opportunity Zones can only work to revitalize our neighborhoods when local knowledge, creativity and ingenuity are harnessed to invest in the quality of life of our residents. That is why we are setting a goal to train 500 Birmingham residents on Opportunity Zones by summer 2020 so that residents can identify and shape projects throughout our city.

Randall Woodfin

Mayor of Birmingham, Alabama

We are honored to be recognized as a national leader in Opportunity Zones. With 126 designated zones that span the state, Colorado’s Opportunity Zones are attracting capital to our state, helping to grow our economy and supporting our rural communities. I’m proud of all the hard work so many have done to ensure Colorado leads the way in deploying this compelling federal tax incentive.

Jared Polis

Governor of Colorado

These Opportunity Zone designations will help build on our ongoing community development efforts and encourage additional private investment where it can have the most impact – in economically-distressed communities.

John Carney

Governor, Delaware

By investing $12 million in Rebuild Illinois funds in Opportunity Zone projects, we can take advantage of this federal tax incentive to stretch our capital dollars further while creating jobs and opportunities in communities that have suffered from a lack of investment for decades.

J.B. Pritzker

Governor of Illinois

Opportunity Zones have the potential to generate the kind of economic activity that can transform lower-income areas across our state. Our economic developers, local governments and investment professionals are well-positioned to put this program to work for Louisiana.

John Bel Edwards

Governor of Louisiana

We plan to do everything in our power to utilize new and existing state and federal programs, grants and funding sources, and to have all of our state agencies work collaboratively with our county and municipal governments and the private sector to supercharge our opportunity zone revitalization. Our plan is to make Maryland’s 149 opportunity zones the most competitive ones in America.

Larry Hogan

Governor of Maryland

The opportunity zone program helps leverage private investment in Massachusetts cities and towns and can be a catalyst for job creation and economic activity.

Charlie Baker

Governor of Massachusetts

If we want to call Michigan a successful state, we’ve got to expand opportunities for business owners in our opportunity zones. I’m confident that the cabinet I put together will partner with Michigan business owners and ensure they have the resources they need to create more good-paying jobs. This executive directive will take a much-needed step toward building vibrant communities here in Michigan.

Gretchen Whitmer

Governor of Michigan

The Opportunity Zones program provides Minnesota a great opportunity to work with local community leaders and our federal partners to build upon that important work and improve people’s lives.

Mark Dayton

Former Governor of Minnesota

One of the goals of my administration is to spread investment to all corners of New Mexico and we want to use every tool we can to accomplish that. That’s why we are going ‘all in’ for Opportunity Zones and giving an extra boost to help these communities.

Michelle Lujan Grisham

Governor of New Mexico

These Opportunity Zones and the funds that support them will provide access to capital in low-income communities that otherwise may not attract it. It’s another tool to help cities reach their full potential and create healthy, vibrant communities that can attract and retain a 21st-century workforce.

Doug Burgum

Governor of North Dakota

Communities nationwide are competing for private investment in their Opportunity Zones, and we want to give Ohio communities the edge. This will make it more attractive for investors to direct their investments here.

Mike DeWine

Governor of Ohio

Our goal is economic prosperity for all Utahns. Opportunity Zones will go a long way in helping to support growth in economically-distressed areas throughout the state.

Gary Herbert

Governor of Utah

We are focused on leveraging the Opportunity Zones incentive to create new jobs, amenities, and economic opportunities for DC neighborhoods that need them most. With the OZ Marketplace and Community Corps, we are providing existing residents and small businesses owners with the expertise and platforms they need to navigate potential Opportunity Zone transactions.

Muriel Bowser

Mayor of Washington, D.C.

From the City of Pawtucket’s perspective, without those types of opportunity zones and the [tax-increment financing] district legislation, we would be sitting here as we have for the last twenty something years in Pawtucket without these types of developments.

Don Grebien

Mayor of Pawtucket, Rhode Island

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