Opportunity Zone Extension Proposed in the House – Motley Fool

The centerpiece of the Opportunity Zone (OZ) Program would get two more years of life under bipartisan legislation introduced this month in the U.S. House of Representatives. The Opportunity Zones Extension Act of 2021 would extend by two years -- until 2028 -- the ability for taxpayers to defer capital gains taxes by investing in qualified opportunity funds (QOFs).

"The Opportunity Zones Program was making a difference in East Tennessee communities and underserved areas around the country before the COVID-19 pandemic rocked our economy. Extending this program would give investors additional time to provide meaningful financial support to businesses and create quality, good-paying jobs in opportunity zones," says Rep. Tim Burchett, the Knoxville Republican who introduced the bill along with Texas Democrat Henry Cuellar.

Opportunity zones were created with bipartisan support as part of the Tax Cuts and Jobs Act of 2017 to incent investment in economically distressed areas, about 8,700 of them in areas designated by census tract across the country.

Generous deferments on capital gains invested and then realized within the QOF investments themselves have attracted billions of dollars into QOFs, although just how much is unclear.

For instance, the White House Council on Economic Advisors pegged it at $75 billion in a report last August. Burchett's news release said $52 billion before the pandemic struck. And Novogradac, the San Francisco-based consultancy that operates the Opportunity Zone Working Group (OZWG), says that 659 of the 969 QOFs it's tracking have reported dollar amount of equity they've raised and that as of year's end it was at $15.16 billion, up $3 billion since August.

"Despite unprecedented economic challenges, people continue to invest in opportunity zones," John Sciarretti, head of the OZWG and a Novogradac partner working out of its Dover, Ohio, office, says in his firm's Feb. 3 news release. "As time passes and investors become more comfortable and familiar with investing in opportunity funds, we expect the amount of investment to continue to grow."

Some stakeholders in the Opportunity Zone Program and QOFs see 2021 as the year when the program begins to gain significant traction as all that money begins to go to work, primarily in residential and commercial projects.

How this latest bill fares in Congress also will be a bellwether for the program, which provides tax breaks the likes of which were seen as possible targets by an incoming Biden administration. However, the tradeoff in economic development and job creation is seen as a win-win, and the program is gaining interest both from prominent wealth and investors more of the Main Street variety.

It would seem the OZ Program has a decent chance of continued support in Congress and the White House, although it's also safe to assume some regulatory reform will be coming, particularly in the area of reporting on the program's impact.

Perhaps the impetus to report progress as a means of justifying their existence will help push QOF managers to put that money to work sooner than later.

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Opportunity Zone Extension Proposed in the House - Motley Fool