HUD published a notice in the Federal Register on April 17, seeking public suggestions on how HUD could use its existing authorities to maximize Opportunity-Zones benefits for residents and their communities.
HUD poses several questions, including:
- What actions can HUD take to prioritize federal investments and programs in Opportunity Zones?
- What actions can HUD take to minimize regulatory and administrative costs and burdens that might discourage public and private investment?
- What policies could HUD implement that would help community-based applicants identify and apply for federal resources?
- What role can HUD play in helping to ensure existing residents, businesses, and community organizations in Opportunity Zones benefit from the investments and remain the focus of their communities’ growth?
- How can HUD properly evaluate the impact of Opportunity Zones on communities?
Opportunity Zones, created by the 2017 Tax Cuts and Jobs Act, were designed to spur investment in distressed communities through tax benefits to investors. State governors, the mayor of the District of Columbia, and chief executives of five U.S. territories nominated Opportunity Zones, and the Department of Treasury designated 8,761 zones (see Memo, 10/22/18).
An Opportunity Zone is composed of “low-income” census tracts that have a poverty rate of at least 20% and a median family income no greater than 80% of the area median income. A census tract that is not “low-income” may be designated as part of an Opportunity Zone if it is contiguous to low-income tracts that make up an Opportunity Zone and it has a median household income that does not exceed 125% of the median income of the contiguous low-income census tracts that form an Opportunity Zone. Up to 5% of the census tracts may qualify under this exemption.
To date, there are no regulatory provisions specifying that investments must benefit low-income people, build affordable housing, employ low-income residents, or protect and support existing local business. Nor are there protections to prevent the displacement of low-income people as a result of the new investments in the distressed communities.
The first set of proposed rules covered very technically complex tax-related provisions. It included topics such as capital gains eligible for tax deferral, the types of taxpayers eligible to elect gain deferral, attributes of included income when gain deferral ends, offsetting-positions transactions and straddles, and gains of partnerships and other pass-through entities (see Memo, 10/22/18). The second set of proposed rules were published on April 17 that again are focused on technical tax-related issues (see article in this Memo).
Advocates are concerned that Opportunity Zones could lead to even greater private investments in already gentrifying areas and could result in higher incidents of displacement of low-income families. They call for rules to ensure Opportunity-Zone investments benefit low-income households. “Unless the Treasury Department quickly establishes regulatory guardrails,” said NLIHC President and CEO Diane Yentel, “there is no guarantee that low-income people will benefit in any significant way — if at all — from Opportunity Zones."
Comments are due June 17.
The Federal Register notice is at: https://bit.ly/2IrkRLu