Enterprise Submits Comments to Treasury on Implementation of Opportunity Zones
Yesterday Enterprise submitted comments to the Department of Treasury with recommendations for implementing Opportunity Zones. These comments leverage Enterprise’s more than 30 years of community investment expertise to ensure that community development best practices are included in the rules and regulations around Opportunity Zones.
Enterprise’s comments provide recommendations for Treasury around both the designation of Qualified Opportunity Zones and the certification of Qualified Opportunity Funds. These comments include regulatory recommendations, as well as recommendations for Treasury to request additional statutory authority from Congress.
Designation of Qualified Opportunity Zones
- Extend the Determination Period: Nominating census tracts to be Qualified Opportunity Zones is a critical step in structuring this new community investment tool and Enterprise believes that governors should be provided time for a thoughtful, deliberate process that incorporates feedback from local stakeholders and communities. Considering that Treasury is still updating its data and mapping tools and has not issued final regulations and rules for the tax benefit, Enterprise believes Treasury should request additional guidance from Congress to extend the nomination timeline until 90-days after Treasury has issued final rules and regulations.
- Require an Explanation of Qualified Opportunity Zones Nominations: Enterprise recommends that Treasury require governors to submit an explanation of the factors that went into designating the identified tracts. These explanations should follow the guidance set forth by Congress in the Conference Report of the Tax Cuts and Jobs Act, i.e. areas that:
- Are currently the focus of mutually reinforcing state, local, or private economic development initiatives to attract investment and foster startup activity;
- Have demonstrated success in geographically targeted development programs such as promise zones, the new markets tax credit, empowerment zones, and renewal communities; and
- Have recently experienced significant layoffs due to business closures or relocations.
- Allow Treasury to Select Census Tracts in Absence of Nominations: Due to the short timeframe for nominating census tracts, Enterprise recommends that Treasury request authority from Congress to designate census tracts for a state in the absence of a governor submitting nominations. If this authority is granted, we recommend that Treasury request public input to guide its decision-making process when identifying census tracts.
- Provide Flexibility for Re-Evaluating Eligible Qualified Opportunity Zones: Given the long-term nature of these investments, Enterprise recommends that Treasury request additional authority from Congress to amend a state’s Qualified Opportunity Zones over the ten-year period to reflect potential changes in the census tract, such as the displacement of residents or local businesses.
Certification of Opportunity Funds
- Define Abuse to Protect Communities and Residents: Because Opportunity Fund investments provide a private tax benefit for investing in distressed communities, Enterprise believes that the foregone tax revenue associated with Opportunity Zones must demonstrate a community benefit to be eligible for the tax incentive. As such, Enterprise recommends that Treasury define “abuse” as any investment that does not provide a direct and sustained community benefit to the residents living in the community.
- Include Annual Reporting Requirements: Without annual analysis of where Opportunity Funds are investing, there will be no indication if the investments are benefiting or harming the residents and local businesses in the census tract at the time it is designated as a Qualified Opportunity Zone. Enterprise recommends that Treasury follow the guidance set forth by Congress in the Conference Report of the Tax Cuts and Jobs Act and provide an annual report to Congress detailing metrics related to community and resident benefits in each Qualified Opportunity Zone.
- Require an Explanation of Intent for Fund Certification: Enterprise recommends that Treasury require Opportunity Funds to share their intentions for investing in geographic areas, investment types, and asset classes prior to receiving certification as a way to ensure that these new investment funds are structured with an eye towards equitable community investments.
Enterprise is excited about the potential for Opportunity Zones to bring together public and private resources that create strong neighborhoods of opportunity for low- and moderate-income residents, and we look forward to working with Treasury to ensure that the ensuing revitalization occurs within a framework of equitable economic growth.
See Enterprise’s Opportunity Zones resource page for more information, including education materials, links to webinars, our free online mapping tool and more.