The proposed legislation would institute impact reporting requirements and other measures designed to ensure the long-term success of the program.
A new bill has been introduced in both the House and Senate that would bring significant change to the Opportunity Zones initiative. The Opportunity Zones Transparency, Extension, and Improvement Act, introduced by Senators Cory Booker (D-NJ) and Tim Scott (R-SC) along with Representatives Ron Kind (D-WI-03) and Mike Kelly (R-PA-16), would introduce robust reporting requirements in order to properly measure success and help the program fulfill its mission of directing investment toward communities in need.
Since the creation of the OZ program as part of the Tax Cuts and Jobs Act of 2017, many industry stakeholders have advocated for reporting requirements that would demonstrate the efficacy of these tax incentives on the economies of disadvantaged communities. Comprehensive impact reporting standards have been one thing that investors, fund managers, and service providers have agreed are missing from the program, as they could improve accountability, remove bad actors, and strengthen OZ’s reputation with accurate proof of results.
Among the additions proposed in the bill are a few key items:
- Reporting and community measurement requirements: The legislation incorporates elements of the bipartisan IMPACT Act (S.2994) to establish reporting and outcomes measurement standards. It would require that the Department of the Treasury publish reports on national OZ activity that include aggregated data on factors like the number of Qualified Opportunity Funds, total assets held by those funds, and the distribution of OZ investments, as well as how OZ communities have performed over time by comparing key socioeconomic indicators against low-income communities that were eligible but not designated for OZ.
- Sunsetting of Opportunity Zones with high median family incomes: The OZ designation would be removed for tracts that have a median family income of 130% of the national median family income or greater. States would have the ability to replace those tracts with other low-income communities of highest need.
- Extended deadline for OZ benefits: The OZ deferral date and investment deadline would be moved from 2026 to 2028. The length of investment required to receive the 15% step up in basis would be shortened from seven years to six.
- Fund of funds: The law would create pathways for smaller-dollar impact investments by allowing QOFs to be organized as funds of funds that could then invest in other QOFs. This could potentially provide needed financing to smaller community projects.
- Rust to Revitalization Act: The bill would include provisions from the Rust to Revitalization Act (HR 7183) to designate certain zero-population census tracts as Opportunity Zones if they are adjacent to an existing OZ, formerly used for industrial purposes, and contain a brownfield site.
These are just a few of the bill’s provisions, but they demonstrate a willingness on the part of lawmakers to avoid judging the program prematurely and institute rules that will allow the industry to prove the effectiveness of OZ as a whole.
“With robust impact reporting standards, we can see where OZ has been most effective and modify the program to encourage even more investment in the communities that need it most,” said Shay Hawkins, Chairman and CEO of the Opportunity Funds Association. “We know Opportunity Zones have been incredibly successful for disadvantaged areas, and now we can find ways to make them even better.”
As the leader in Opportunity Zones fund administration since the program’s inception, JTC Americas has long advocated for proper impact reporting standards. It’s our goal to help impact investments do the good they intend to do, and we already provide industry-leading impact reporting and award-winning technology to help funds stand out in the OZ marketplace. We can help you make sure your fund is positioned for success amidst these changes, and that you can show investors solid evidence of that success.
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Learn more about our OZ Fund Administration by downloading our Opportunity Zone Fund Administration solution sheet!