The Opportunity Zone program, part of the 2017 Tax Cuts and Jobs Act, has been touted as a key tool in revitalizing distressed communities. The Trump administration argues that giving tax breaks to investors to incentivize investments in certain struggling geographical areas will in turn benefit these communities and their residents.
Critics of the Opportunity Zone program, however, argue that such trickle-down approaches do not work, and that this latest tax break only adds to the tax giveaways for the rich. Moreover, they point to evidence that the program is geared exclusively toward the wealthy and could even harm the residents and communities it is meant to serve. Proponents, on the other hand, have touted new projects—the result of incentivized investment—that could benefit distressed communities. Which side is ultimately correct depends on the U.S. Department of the Treasury’s guidance on how to implement the program. Its most recent set of rules, however, make clear that the Opportunity Zone program will not be a tool for economic development. If it was, Treasury would have imposed strict guidelines that ensured the projects funded through the program are those needed and vetted by targeted communities. However, the loose rules and favorable eligibility requirements in Treasury’s new guidelines will ensure that the Opportunity Zone program is just a tax shelter for the wealthy to park their capital gains.
Treasury’s goals are clear in the second set of program regulations
On October 19, 2018, the IRS released its first set of guidance on the Opportunity Zone program, which did not impose strict rules. Unfortunately, these regulations spoke only to the business aspects of the program and did not address any of the concerns that pertain to the communities the program will serve. Community advocates hoped that the next set of guidelines would fix this shortcoming and address community concerns, including the potential for gentrification resulting from displacement.