President Trump would push for more Opportunity Zones, more time for investors to invest in them, and more reporting requirements to better track the nascent program’s metrics in a second term, according to a White House adviser.
“We’re looking to see if we can work with Congress to create some more extensions around some of the time frames here so that everyone can garner all of the possibilities that Opportunity Zones bring,” Ja’Ron Smith, an adviser in the White House’s Office of American Innovation, said October 22.
The Opportunity Zone program, created by the Tax Cuts and Jobs Act, allows for the deferral, reduction, and in some cases elimination of capital gains tax when those gains are invested in qualified opportunity funds or businesses. Final regulations (T.D. 9889) implementing the Opportunity Zone program were published less than a year ago.
The Trump administration also wants to substantially expand the number of Opportunity Zones, according to Smith. As enacted, governors were able to designate up to 25 percent of their states’ low-income census tracts as Opportunity Zones. If Trump is reelected, the White House would “maybe look at another 25 [percent],” Smith said at a virtual conference hosted by Novogradac & Co. LLP.
Smith noted that the United States just finished its 2020 census, which might affect some of the economic census tracts eligible to be designated as Opportunity Zones. At the same time, the White House has no intention of removing the special designation from any existing zones: “We don’t want to take the rug out from underneath investors that are already working in certain zones,” he said.
The decision as to which census tracts would be designated under an expansion of the program would be left up to governors and mayors, Smith said, adding that many governors didn’t pay enough attention to which tracts received the Opportunity Zone designation in the first round. “In a second bite at this apple, everyone will pay attention, be more involved, and be a lot more thoughtful with their Opportunity Zone strategy,” he said.
Smith expressed the White House’s support for more reporting requirements to provide better metrics on how qualified opportunity funds are investing and how Opportunity Zones are performing, such as measuring job creation, small business creation, and low-income housing availability. That “would push the market to really look at the social impact part of investing into Opportunity Zones,” he said.
About That
In a separate panel, Ethan Holmes, an aide in the office of House Ways and Means Committee member Ron Kind, D-Wis., observed that there is bipartisan support in Congress for additional reporting requirements. “Investors and people in Congress want to know where money is going, whether it’s working,” and in particular, whether rural areas are being overlooked, he said.
Catherine Lyons of the Economic Innovation Group similarly observed that more reporting requirements, regardless of the November election's outcome, will be the top Opportunity Zone reform priority for both Democrats and Republicans. Until those requirements are instituted, it will be “hard to make educated policy decisions about how to tweak the program without leaps of faith,” she said.
Lyons differed from Smith on what to do about disqualifying zones, arguing that prospective disqualification is “critical to the ultimate success of the program.” A small percentage of Opportunity Zone tracts don’t meet the spirit of the law, yet have “driven negative press that informs the opinions of policymakers,” she said.
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