Senate Looks to Enshrine Opportunity Zones in Tax Code

The House of Representatives wants to see the Opportunity Zone program continue for a few more years. The Senate wants it to live on indefinitely.

The Senate Finance Committee’s tax and spending bill proposal includes a provision to make Opportunity Zones a permanent part of the tax code, Bisnow reported. The next cycle would begin on July 1, 2026, and go into effect the following year. The program would be redesignated every decade.

“EIG applauds Chairman [Mike] Crapo and the Senate Finance Committee for their leadership in advancing legislation to make Opportunity Zones a permanent feature of the tax code,” Economic Innovation Group chief executive officer John Lettieri said in a statement; the think tank was critical in the original inception of the Opportunity Zone program.

The program was originally set to come to a close next year. The proposal released last month by the House Ways and Means Committee — ultimately passed by the House — extended the program through 2033. Both versions include provisions that would increase benefits for investment in rural areas, as well as lower the income threshold for areas to qualify.

While there seems to be consensus from both legislative bodies about keeping Opportunity Zones around, the Senate bill still needs to be marked up before being presented to the larger body. If the Senate approves, the bill goes back to the House, where momentum to pass didn’t appear strong, based on initial reactions to its release.

Opportunity Zones popped up in 2017 as a feature of the Tax Cuts and Jobs Act, which aimed to drive investment to distressed communities. Investors are eligible for tax incentives if they reinvest capital gains towards businesses or real estate projects in Opportunity Zones.

There are more than 8,700 OZ census tracts across the country today.

Opportunity Zones aren’t necessarily all they are presented to be. A report from New York University’s Furman Center found that housing built in New York Opportunity Zones was disproportionately market-rate and located in non-low-income districts, echoing a common criticism that the program leads to luxury housing and fails to lift up neglected, investment-starved communities.

The report makes clear that any updates to the program likely won’t reconcile dramatic budget shortfalls of other housing programs, which will likely have a negative effect on future affordable housing development and upkeep.

— Holden Walter-Warner