Opportunity Zones Plus: Critical Industries in Underserved Areas
The enactment of Opportunity Zones (OZs) was a cornerstone of the Tax Cuts and Jobs Act of 2017 that has brought $84 billion of equity investment to distressed communities across America. A higher tier of OZ incentives, OZ+, would build upon OZ’s positive legacy to deliver needed solutions in critical industries.
OZ+ Pillar I to Reward Impact and Deregulation
Regulation drives up the cost of projects and exacerbates critical problems such as housing affordability. Incentivizing communities to reduce burdensome regulations can lead to reduced costs, thereby unlocking more public and private resources. Here’s how OZ+ does it:
- Creates a higher tier of OZ+ tax incentives for investments in low-regulation areas.
- Reward states and localities that ease regulatory barriers by adding an OZ+ location designation, which would unlock additional incentives to attract more investment in OZs.
- The objective criteria determining OZ+ locations (a subset of OZs) could be a front-end point system that rewards specific deregulatory actions or a back-end measurement of housing supply outcomes.
OZ+ Pillar II to Grow Investment in Critical Industries
Critical problems like housing affordability or supply chain issues call for a robust approach. Allowing investors to receive more substantial incentives (OZ+) for high-impact investments would focus on the private sector’s ingenuity and innovative potential to deliver much-needed solutions. Here’s how OZ+ does it:
- Creates a higher tier of OZ+ tax incentives for critical needs investments in eligible low-income census tracts regardless of designation.
- Originally, governors could designate up to 25% of their eligible low-income census tracts as OZs.
- Designated critical Industries would receive OZ+ incentives if the investment is in an eligible census tract, regardless of its OZ designation.
- For example, designated critical Industries could include certain manufacturing or affordable housing developments, and if built in eligible low-income tracts, these would receive OZ+ incentives.
- Creates a higher tier of OZ+ incentives for Disaster Rebuilding Zones in times of natural disasters.
- To facilitate recovery of highly distressed areas from natural disasters, OZ+ incentives could be extended to designated Disaster Rebuilding Zones at specified times.
The reforms in OZ+ can help address our Nation’s most pressing problems and help usher in a new golden age of America.