Tucked into the 2018 Tax Cuts and Jobs Act was a provision to encourage investors to put capital in distressed communities. Dubbed “Opportunity Zones,” this provision allows governors to nominate low-income communities within their states to receive the Qualified Opportunity Zone designation from the Department of Treasury. Once in place, investors will be able to defer capital gains taxes when they choose to reinvest their earnings in these communities. Additional incentives accrue over time, encouraging investors to provide long-term capital so often lacking in distressed communities.
Interested communities submitted recommendations to the Department of Treasury, and each state’s governor was allowed to nominate up to 25% of its low-income community tracts to receive the Opportunity Zone designation. A region will retain its Opportunity Zone status for 10 years.You can learn more from Economic Innovation Group, which led the research effort behind this new national community investment program that connects private capital with low-income communities across America.
Why Opportunity Zones Might Matter to Your Foundation?
In a 2018 speech in Cincinnati, President Trump obliquely touted the Qualified Opportunity Zones (QOZs) as a feature of the tax overhaul. Afterwards, the legislation became a feature of the tax law passed by Congress and signed into law. Foundations can and should play a role in supporting the eco-system that will ensure the success of opportunity zones. Several resources have been listed below to assist foundations seeking to learn more.
Additional Resources for Philanthropy
Council on Foundations' Resources
- Webinar Recording: Opportunity Zones: Can Foundations Help Communities Get Ready?
- Webinar Recording: A Primer for Funders on CDFIs: Co-Investing in Opportunity Zones & Inclusive Economic Development
- Blog: Community Foundations Can Help Make the Most of Opportunity Zones
In June, 2018, the Treasury Department announced the final round of opportunity zone designations for four additional states. In total, the program has designated opportunity zones in all 50 states and five territories. Treasury has stated that nearly 35 million Americans live in designated opportunity zones. The full list of designated opportunity zones if available here. Additionally, Smart Growth America released a LOCUS Opportunity Zone Navigator that provides important data for gaining more information about these selected opportunity zones.
- Resources from Mission Investors Exchange
- Locus Impact Investing: Community Foundation Specific Resources
- Community Foundation Public Awareness Initiative: How Community Foundations Can Use the Opportunity Zone Tax Incentive for Community Development
- U.S. Impact Investing Alliance resources
- Community Development Financial Institutions Fund
- CDFI Fund Map of All Census Tracts Eligible for Designation as a Qualified Opportunity Zone - The CDFI Fund has identified over 41,000 population census tracts that are eligible for designation as a QOZ, including (1) 31,680 population census tracts that are Low-Income Communities (LICs) eligible for designation as QOZs; and (2) 9,453 non-LIC population census tracts that are eligible for designation if a particular LIC contiguous to the non-LIC tract is designated as a QOZ. Contiguous Tracts must be at or below 125% of the area median income.
- Brookings Institution: The early results of states’ Opportunity Zones are promising, but there’s still room for improvement