Bipartisan and bicameral legislation was introduced last week that would improve Opportunity Zones and push back the tax incentive’s deferral date by two years, from 2026 to 2028.

Co-sponsored by Senators Cory Booker (D-NJ) and Tim Scott (R-SC) and U.S. Representatives Ron Kind (D-WI) and Mike Kelly (R-PA), the Opportunity Zones Improvement, Transparency, and Extension Act includes new mandates that would reform and improve the Opportunity Zones tax incentive. Specifically, the legislation would require the following:

• Extending the tax incentive for two years. December 31, 2026 is the current deferral date. This is also the final date on which an investor can realize a capital gain that is eligible for investment into a Qualified Opportunity Fund. The legislation would push this date back by two years, to December 31, 2028.
• Expanding reporting requirements that would provide much-needed transparency into how well the Opportunity Zone incentive is working.
• De-certifying high income Opportunity Zones. The legislation calls for the early sunsetting of the small percentage of Opportunity Zones that have median family income at or above 130 percent of the national median family income. Additionally, states would have the opportunity to designate new census tracts to replace any that are early sunsetted.
• Allowing for fund of funds. Currently, a Qualified Opportunity Fund is not permitted to invest into other Qualified Opportunity Funds. This legislation would unwind this restriction, allowing for “fund of funds,” which would potentially help smaller communities and projects raise equity more easily.
• Establishing a State and Community Dynamism Fund. Flexible grants would provide operating support and technical assistance to underserved communities.

These proposed changes provide welcomed reforms to the current incentive. The legislation would require expanded informational reporting by Qualified Opportunity Funds, similar in nature to the reporting requirements originally included in the Investing in Opportunities Act, but removed from the final OZ statute that was passed as part of the 2017 Tax Cuts and Jobs Act.

“The Opportunity Zone incentive has the potential to unleash much-needed economic growth in high poverty communities across the country – communities that investors too often overlook,” Sen. Booker said. “But without robust guardrails in place, the incentive could be undermined or abused by those who aren’t committed to uplifting rural and urban communities across the country. I am proud to introduce this legislation with Senator Scott to help restore the original promise of opportunity zones by steering private capital to reinvest in underserved communities that have been historically left behind and working to level the economic playing field.”

Co-sponsor Sen. Scott echoed similar thoughts. “The Opportunity Zone program represents the good that leaders can do for communities across the country when we work together toward common sense solutions,” Sen. Scott said. “Independent reporting shows that investments in Opportunity Zones are making a huge impact across the country, with billions of dollars flowing into impoverished neighborhoods. I am glad to build on that success with this legislation to make the program stronger, so that we can ensure this incentive is benefitting the Americans who need it most.”

Other sponsors of the bill included Senators Mark Warner (D-VA), Chris Van Hollen (D-MD), and Todd Young (R-IN), as well as U.S. Representatives Terri Sewell (D-AL), Dan Kildee (D-MI), and Jackie Walorski (R-IN).

On April 28th, OZworks Group will host a webinar on the new legislation and how Opportunity Zone stakeholders can advocate for the legislation’s enactment. Webinar panelists will include Chris Cooley (OZworks Group), Jimmy Atkinson (OpportunityDb), Catherine Lyons (Economic Innovation Group), and Rachel Reilly (Aces and Archers).

Click here to learn more and register for the free event.