April Updates on Opportunity Zones
After months of little to no updates on Opportunity Zones (OZs), there has been a flurry of recent federal activity. Within a short period of time the IRS released its second round of proposed OZ guidance, and several major developments came from the White House Opportunity and Revitalization Council. HUD released an overview of activities in OZs and a request for input, and important bipartisan legislation is reported to be advancing.
In this blog post, we will review these developments and share information on how stakeholders can engage.
IRS Releases Further Opportunity Zones Guidance, Sets Date for Next Public Hearing and Requests Input on Collecting Public Data
On April 17, the IRS released the second tranche of proposed OZ guidance. The 169-page document provides guidance on a range of technical issues that investors, fund managers, and other stakeholders have been waiting for clarification on. The proposed guidance notably does not include reporting requirements. However, the Treasury also released a request for information on data collection and tracking for OZs. It is expected that reporting requirements will be addressed in the coming months.
Establishing reporting requirements to improve transparency and accountability of qualifying opportunity fund (QOF) investments has been a top priority for Enterprise. Stay tuned for more information on the proposed guidance in a forthcoming blog post, and more information on Enterprise’s recommendations for data collection and tracking. Novogradac has provided an initial overview of the guidance.
How to Engage:
Investors who have been waiting for clarity on navigating QOFs should dig in. Public input on collecting and tracking data will be due to the Treasury 30 days after the request is published in the Federal Register. Comments on the second round of guidance will be due 60 days after the guidance is published in the Federal Register. (Neither are published at time of this posting.)
Save the Date:
The IRS will hold a public hearing to discuss the proposed guidance on July 9, 2019, at 10 a.m. The public hearing will be held at the New Carrollton Federal Building at 5000 Ellin Road in Lanham, Maryland 20706.
Updates from the White House Opportunity and Revitalization Council
There are several updates from the White House Opportunity and Revitalization Council (“Council”). President Trump established the Council in December 2018 to target, streamline, and coordinate Federal resources to be used in OZs and other economically distressed communities. The interagency Council is chaired by HUD Secretary Ben Carson.
On April 4, the Council held its first meeting and President Trump introduced Scott Turner, who previously served in the Texas House of Representatives and is a former NFL player, as the new executive director of the Council. At the meeting, President Trump asked the various Cabinet Secretaries to share updates on how they have incorporated OZs in their programs.
Reports ranged from Labor Secretary Alexander Acosta’s update that the Department of Labor is adding preference points to grants focused on workforce development opportunities in OZs, to EPA Administrator Andrew Wheeler’s report that the EPA will announce more than $15 million in grants this summer to revitalize communities that will use OZ designations as a tie-breaking criteria. Secretary Carson did not share any specifics from HUD.
Shortly thereafter, on April 17, the Council published its Implementation Plan. The plan states that the Council “maintains the core mission and function of leading joint efforts across executive departments and agencies to engage with State, local, territorial, and tribal governments to attract private capital and better use public funds to revitalize urban and economically distressed communities.” The plan elaborates on the Council’s goals and functions, which include but are not limited to:
- Assessing actions each agency can take under existing authorities to prioritize or focus Federal investments and programs on urban and economically distressed communities, including qualified opportunity zones;
- Coordinating Federal interagency efforts to help ensure that private and public stakeholders–including public housing agencies, non-profit organizations, and economic development organizations–can successfully develop strategies for economic growth and revitalization;
- Evaluating appropriate methods for Federal cooperation with and support for States, localities, and tribes that are innovatively and strategically facilitating economic growth and inclusion in urban and economically distressed communities, including qualified opportunity zones, consistent with preserving State, local, and tribal control; and
- Evaluating what data, metrics, and methodologies can be used to measure the effectiveness of public and private investments in urban and economically distressed communities, including qualified opportunity zones.
The plan also establishes a framework for the implementation of these goals. The HUD Secretary will be advised by five subcommittees:
- Economic Development
- Safe Neighborhoods
- Education and Workforce Development
The subcommittees identify a range of issues that they will focus on, including the following: infrastructure programs; minority, female, and rural entrepreneurship; crime reduction; public safety; environmental conditions; reentry programs; workforce development; and educational opportunities, especially charter schools.
When overviewing the Economic Development subcommittee, the plan acknowledges the importance of investments in housing, stating, “Targeted public investment in infrastructure, transportation, public spaces, and housing will help Opportunity Zones attract private capital to withstand periods of economic distress.” However, there is no direct language about how OZs would prioritize housing, let alone housing affordable to low-income residents.
Also noteworthy is the Measurement subcommittee, which will be led by the Council of Economic Advisors and is responsible for developing robust reporting and analytics to measure the impact of Opportunity Zone investments.
How to Engage:
To start, the Council will conduct a listening tour of rural, urban, and suburban OZs and other distressed communities during the spring and summer of 2019. OZ stakeholders should prepare to engage with the Council’s listening tour to ensure that the Council pursues policy changes that serve existing low-income residents and provide equitable and inclusive benefits. Enterprise will share dates and locations of the listening tour as they are published and other future updates from the Council as they relate to housing and community development activities.
HUD Releases Review of HUD Activities in Opportunity Zones and Requests Public Input
On April 12, HUD released a document that provides a snapshot of HUD’s programs and initiatives within OZs and requested input and recommendations on how HUD can incorporate OZs into existing policies, practices, planned actions, regulations, and guidance.
According to HUD:
- 2,394,000 persons live in HUD-assisted housing within OZs (27% of total residents of HUD-assisted housing).
- 371,000 public housing units are within OZs (38% of the total), and 738,000 persons are living in public housing within OZs (39% of the total).
- 465,000 housing choice voucher units are within OZs (22% of the total).
- 62,000 project-based voucher units are within OZs (32% of the total).
- 337,000 project-based rental assistance units are within OZs (27% of the total).
- Almost one-third of Rental Assistance Demonstration (RAD) Component 1 conversions are within OZs.
- 265,000 completed HOME developments from 1996-2018 are within OZs.
The document also invites public input in a series of important questions, including:
- How should HUD use its existing authority to maximize the beneficial impact of OZs?
- What types of information and other guidance should HUD include if it were to create an information portal on OZs?
- How could HUD structure preference points for OZs in discretionary grant competitions?
- What types of technical assistance could HUD offer?
- What role can HUD play in helping to ensure that existing residents, businesses, and community organizations in (OZs) benefit from the influx of investment and remain the focus of their community’s growth moving forward?
- How can HUD properly evaluate the impact of OZs on communities?
- How should HUD interact with other stakeholders to maximize the success of OZs?
- How might QOF investments support the goal of ending homelessness?
How to Engage:
This is an important opportunity for OZ community members and stakeholders to engage with HUD and provide input on how HUD can ensure OZs benefit existing low-income residents and businesses. It is also critical for affordable housing advocates to consider how new prioritization of OZs might impact existing HUD programs and policies, and to provide responsible and feasible recommendations. Enterprise will be preparing comments to HUD, and we encourage our partners to prepare comments to HUD as well. Comments will be due to HUD by June 17, 2019.
Forthcoming Bipartisan Legislation Would Establish Reporting Requirements
Enterprise has been deeply engaged with advancing reporting requirements through legislation. We are expecting forthcoming bipartisan legislation that would establish reporting requirements to be introduced following the Congressional recess. By establishing reporting requirements, the bill would call for invaluable information for evaluating the OZ tax incentive, including where investments are being made, what is being invested in, and the amount of private capital moving into low-income communities. Stay tuned for updates on this bipartisan legislation.
For more information about these Opportunity Zones policy developments, please contact Sarah Brundage, senior director, public policy, at email@example.com.