In our previous blog with Shay Hawkins, the former senior tax and economic policy advisor who helped draft the Opportunity Zones legislation in 2017 with Sen. Tim Scott, he set the record straight on impact reporting requirements for the initiative, and why President Joe Biden’s administration needs to continue supporting the bipartisan efforts from across the aisle. Shay, who is president of Opportunity Funds Association, further detailed how Opportunity Zones can benefit from an expansion at National Opportunity Zones Virtual Forum, which was co-hosted by Akerman, JTC Americas (Formerly NES Financial), Brevet, and Cantor Fitzgerald.

Below is an edited transcript of Shay’s key Opportunity Zone takeaways from the Forum, including his critiques and solutions for the initiative. View the recording of the National Opportunity Zones Virtual Forum, and our OZs discussion with former White House Official Ben Hobbs.

Opportunity Zone Critique and Solutions

The Opportunity Zones provision that we drafted in the tax reform is based on the Investing in Opportunity Act, which had 88 house co-sponsors, 44 democrats, 44 republicans and 14 cynical sponsors, 7 republicans, 7 democrats. The policy was designed again to bring private sector capital into distressed neighborhood and improve the lives of the people in those neighborhoods and that can happen in a number of ways.

As you all know, governors were able to designate 25% of the distressed areas in their states as Opportunity Zones, and we gave those governors 3 non-binding criteria as they thought it through and selected those zones. One we ask governors to look for areas where there has been a significant economic disruption. So, areas that have been hit by outsourcing or other forms of economic disruption. So just look at its place where there is a great need.

We also ask governors to look for places where there was a great opportunity. So, a place where it’s easy to turn a dollar into 10. And so finally, we asked for governors to look for areas that had mutually reinforcing state local and federal policies that could kind of put this Opportunity Zone policy on steroids.

And so the good thing about that is that folks look for places where there were actual policies in place at the time but also, those local and state governments have actually sought to put mutually reinforcing policies in place to really boost this policy and obviously, the great work I have done at the White House Opportunity and Revitalization Council, opportunity now to really been the community development resources that the federal government to favor Opportunity Zones is just really dynamite.

The intent again was to benefit those existing residence. We’ve heard some talk about reporting requirements and that is the one area where I think we really fell short in terms of congressional intent. The process of the tax reform was passed, and Opportunity Zones were passed was a budget reconciliation process, just a parliamentary rule, but basically anything that is seemed to be a strenuous to the budget can be challenged by the Democrats and if successfully challenged, the entire provision has to be removed from that law.

So, we drafted the Opportunity Zones provision with robust reporting requirements that would have required the Treasury Department at the 5-year point to collect information and report to congress on how the policy was reformed.

Unfortunately, it became clear that those provisions were going to be challenged as they get strenuous to the budget and basically, everything that was challengeable was being challenged. And so, I was forced to strip those reporting requirements out in order to save the Opportunity Zone provision as a provision.

But fortunately, in December 2019, we saw a bipartisan legislation through the Scott-Grassley bill, also known as the IMPACT Act, which would add those reporting requirements back in and even structure additional more robust requirements. We’re hoping after the election once everybody’s kind of calm down, that we could take a closer look at that.

And the great news even beside that is that third-party administrators like JTC Americas have a robust reporting in transparency platform that’s ongoing. I am hopeful that we would be able to put this in place for our members regardless of what happens on Capitol Hill.

Potential Opportunity Zone Enhancements

One of the things that we hear a lot about is the possible expansion of the Opportunity Zones that could be selected by governors. Governors were able to designate 25% of the distress census tracts as Opportunity Zones. And so, one frequent thing we hear from stakeholders is that they would love for governors to be able to designate either an additional 10% of zones or it would have possibly re-designate zones that are not seeing or not actively pursuing investment.

And so that’s an easy expansion and one that I think would be very welcome in the communities that were a little late to the table and understanding the value of this great, great policy.

Learn More

Watch the full recording of the National Opportunity Virtual Forum today!