The Tax Cuts and Jobs Act (TCJA,) known for creating Opportunity Zones, is often celebrated for its potential to move billions of dollars into low-income communities. However, there remains an open question as to whether this program will ultimately serve to add value, or extract values, from these communities.
Opportunity Zones (OZs) are defined as “economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment.” First conceived in April of 2018, OZ plans are now in place for communities in all 50 states this year. How it works is that each state nominates blocks of low-income areas by census tract, which are then certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service. Through the IRS, investors can file a Form 8896 to create a Qualified Opportunity Fund — vehicles structured as either a partnership or corporation for the purpose of investing in an OZ census track, whether in real estate or directly in businesses through equity. OZs. The fund is required to hold at least 90% of its assets in that qualifying OZ area.
Simply understanding the mechanisms of OZs creates a major barrier to entry for more socially-minded investors. This interview aims to unpack some of the mystery. Markeze Bryant works at Acumen America; a seed stage investment fund focused on helping low-income families generate better access to health care, education, and financial services — taking a start up approach and working with early stage companies. He was born in a now-designated OZ, went to college in an OZ, and most recently was married in an OZ. He has been working diligently to identify, and maximize, the impact opportunity of opportunity zones — and shared his insight on how communities across America can best benefit from the program.
According to the IRS’s website, over the next few months “the Treasury Department will be providing further details, including additional legal guidance, on this new tax benefit.” At this point, can you break down how OZs will work mechanically?
OZs are places in the U.S. where over 30 million people live and work across our country. They cover downtown, industrial, suburban, and rural areas. They’re part of daily life for a lot of people.