Enterprise Urges Policymakers to Increase Transparency of Opportunity Zone Investments
Enterprise has provided multiple resources on Opportunity Zones since the provision was enacted in the Tax Cuts and Jobs Act of 2017, and Terri Ludwig, chief executive officer of Enterprise Community Partners, has been asked to testify before Congress on “The Promise of Opportunity Zones.”
When Terri appears before the Joint Economic Committee this Thursday, May 17, she will share with Congress our work to date. Since the tax bill passed in December, Enterprise has been actively engaged with governors, mayors, community-based organizations and investors. We have been disseminating information, sharing best practices and providing guidance to communities across the country. As a result of that engagement, we have heard their excitement – and concerns – about the implementation of Opportunity Zones in their communities and plan to share those insights with Congress.
Our stakeholders recognize that, if implemented with local needs and priorities in mind, Opportunity Zones have the potential to catalyze investments that revitalize distressed communities and connect local residents to opportunity. They also appreciate that the success of Opportunity Zones depends on its structure and implementation. Our partners on the ground – in urban, rural and all other types of communities – have shared concerns that this private capital may cause unintended negative outcomes for the very people they are seeking to help. In particular, there is a fear that local residents and businesses could be displaced if Opportunity Zone investments cause property values and costs of living to rise.
Enterprise’s vision for the successful implementation of Opportunity Zones includes many of the same best practices that we have seen in our affordable housing and community development work over the past 35 years. The Low-Income Housing Tax Credit and the New Markets Tax Credit – two proven and effective tools that use a tax credit to encourage activity that otherwise would not occur – provide a model for successful public-private partnerships that benefit low-income residents.
Terri will share with Congress our belief that Opportunity Zones have the potential to develop or preserve affordable housing, create and retain jobs that pay a living wage, support minority/disadvantaged/women-owned businesses, and increase transportation options and the overall infrastructure needed to increase access to opportunity for all community members.
To realize this vision, Enterprise will offer Congress two recommendations that will be critical to the success of Opportunity Zones: 1) promoting the transparency of Opportunity Fund activities, and 2) ensuring accountability and preventing abuse in implementation.
Due to the foregone revenue associated with the Opportunity Zones tax benefit, Enterprise believes that Opportunity Funds should be required to report on their investment activity to ensure accountability of federal resources.
Congress provided clear guidance in the Conference Report that accompanied the Tax Cuts and Jobs Act by requesting that Treasury report to Congress on Fund activities and community impacts. However, it is not clear that the implementation process will require Opportunity Funds to report this information.
In our testimony, Enterprise will strongly encourage Treasury to follow Congress’s guidance and collect this data from Opportunity Funds. Without this important transaction-level information, it will be virtually impossible to evaluate the efficacy of Opportunity Zones as an investment tool or the impact that these investments have on communities.
Ensuring Accountability and Preventing Abuse
By definition, Opportunity Zones target some of our nation’s most distressed communities. When fostering economic activity in areas that would not otherwise receive this type of investment, it is critical that benefits accrue to all members of a community, and not just a few.
Congress gave Treasury the authority to promulgate regulations to prevent abuse of Opportunity Funds. Our testimony before Congress will stress the importance of federal guidelines that explicitly prevent Opportunity Fund investments that would disproportionately harm low-income residents and local businesses.
For example, we consider the elimination of affordable housing to be a form of “abuse” under the Opportunity Zones statute because housing affordability is vital to achieve the intent that Congress laid out when implementing this new tax incentive.
The Treasury Department and IRS are expected to released guidance on Opportunity Zones in the coming months. To ensure that Opportunity Zones are implemented with transparent reporting requirements and an explicit commitment to prevent abuse, Enterprise encourages stakeholders to weigh in with Treasury and the IRS to influence implementation.
Stay tuned to the Enterprise blog for updates on Terri’s testimony and resources to engage in the Opportunity Zones implementation process.