On May 17, The Joint Economic Committee held a hearing on “the Promise of Opportunity Zones.” Testimony was presented by Senators Tim Scott (R-SC) and Cory Booker (D-NJ), as well as John Lettieri, Co-founder and President of Economic Innovation Group, Terri Ludwig, CEO of Enterprise Community Partners, and Maurice Jones, President and CEO of LISC.
JEC Chairman Erik Paulsen (R-MN-3) opened up the hearing, “Opportunity Zones hold the promise of flexible, innovative solutions. Flexibility is important because the reason some areas lack economically vary across regions and communities.” To this end, the CDFIs present provided thoughtful recommendations about how Opportunity Zones would be best implemented to truly serve the communities identified as such in each estate.
Ms. Ludwig, in her testimony, shared thoughts on how the public policy goals of Opportunity Zones can be realized: “Because Opportunity Zones provide a federal tax benefit for investing in some of the nation’s most vulnerable communities, Enterprise believes that it is critical that these investments benefit the communities that they are impacting. Every community has its own challenges, so ‘direct and sustained’ benefits will look different across geographies, and state and local governments will need to consider policies and programs that fit their needs. However, Enterprise believes it is important for the federal government to explicitly prevent Opportunity Fund investments that would disproportionately harm low-income residents and local businesses.”
“For example, we recommend that Treasury prohibit abusive investments that result in the net elimination of affordable housing (housing that is affordable to residents earning up to 120 percent of Area Median Income) because housing affordability is vital to achieve the intent of the IIOA. The definition of abuse should also include the refinancing of existing projects. We believe that investments that do not result in new activities or harm low- and modest-income residents will be contrary to our collective public policy goals. We urge the use of notice-and-comment rulemaking to allow affected communities to participate in identifying practices that would constitute abuse.”
Mr. Jones in his testimony addressed both the progress of Opportunity Zones to date as well as some concerns, including, “early indications that the Treasury Department intends to take a minimalist approach to its next phase of administrative oversight, which is the certification of Opportunity Funds. Specifically, the IRS recently released an Opportunity Zones Frequently Asked Questions document stating that Opportunity Funds will self-certify --- that ‘no approval or action by the IRS is required.’”
“The concept of certification of Opportunity Funds by the Treasury Department was a rare instance of an element of the Opportunity Zones legislation that was not drawn from the initial (Investing in Opportunity Act) IIOA proposal – but rather was added into the Opportunity Zone provision during the enactment of the (Tax Cuts and Jobs Act) TCJA. We believe it was the intent of Congress to at a minimum create a safeguard against potentially bad actors abusing the program, but also to potentially offer Treasury a mechanism for screening Opportunity Funds in an even more substantive manner.”
A video recording of the full hearing is available here.
As of May 18, all but four states and territories have designated Opportunity Zones. Florida, Nevada, Pennsylvania, and Utah are the remaining states with Opportunity Zones designations pending approval.