New Data May Impact the Opportunity Zone Program

  • Tax strategies
  • 12/16/2020
Light Office Two Reviewing Document

How will Opportunity Zones evolve? The release of 2018 figures will provide valuable data on the program, and may help chart its future.

Key insights

  • Major changes aren’t expected for the Opportunity Zone program due to broad bipartisan support.
  • OZ figures from 2018 will be released soon to provide clarity on the program’s true impact.
  • Future approval of projects by the government could be forthcoming, so look for increased emphasis on “active” businesses and permanent job creation.
  • CLA can provide tax consulting in the capital-raising process to assist with project strategy.

The initial Opportunity Zone (OZ) legislation, which was part of the 2017 Tax Cuts and Jobs Act, had broad bipartisan support. Even in the event of a divided legislature, major changes to the OZ provisions seem unlikely since the program had such strong backing on both sides of the aisle. However, some changes could still be on the horizon.

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In late 2020 or early 2021, 2018 figures will be released, providing clarity on where OZ projects have been implemented. At that point we’ll have a better understanding of whether OZ projects have provided the stimulus initially anticipated. To this point, there has been a call for increased reporting on job creation and the social benefit of projects. Watch for this to evolve as the U.S. Department of the Treasury considers updates to the Opportunity Zone program to:

  • Increase reporting, transparency, and impact on specific OZ tracts
  • Review existing census tracts to potentially phase out some tracts from OZ eligibility and focus on highest need areas (though existing projects may be grandfathered in)
  • Engage communities by providing more education and empowering local relationships with capital sources
  • Lower the risk of OZ investments and create additional incentives — particularly in operating businesses — either through public or private partnerships with lenders or equity investors

One interesting element of the OZ legislation is that projects are “self-certified.” While they are subject to testing and documentation throughout the life cycle of the project, there is no upfront project approval process.

Based on the outcome of the ongoing study on the utilization of the OZ legislation, government approval on future projects could be in the offing. In addition, look for increased emphasis on “active” businesses and permanent job creation. Changes to the Opportunity Zone program could include:

  • Requiring applications for OZ certification, rather than allowing projects to self-certify
  • Expanding the program to certain disaster zones (authored by Vice President-elect Kamala Harris)
  • Creating additional incentives for qualified opportunity zone funds (QOFs) to partner with nonprofits or community organizations
  • Requiring QOFs and/or qualified opportunity zone businesses to be reviewed by the U.S. Department of the Treasury annually to determine whether policy intent is being met
  • Increasing transparency and disclosure reporting (including making certain data publicly available)

How we can help

The Opportunity Zone could see changes on the horizon. If you’re a developer, consider getting projects in the ground before OZ tracts are potentially re-evaluated or phased out.

CLA’s tax professionals and wealth advisors can help you evaluate opportunities and understand the impact on your tax strategy now and in the future. Our team can also provide tax consulting in the capital-raising process to assist with Opportunity Zone strategy

Securities products, merger and acquisition services, and wealth advisory services are provided by CliftonLarsonAllen Wealth Advisors, LLC, a federally registered investment advisor and member FINRA, SIPC.

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