The enigma of ‘Opportunity Zones’

The days since President Trump signed the massive tax and spending bill have seen an avalanche of stories about its cuts to programs aimed at supporting low-income Americans – food stamps, Medicaid, and educational aid, to name a few. Buried in the bill, however, was a provision that builds on one of the few initiatives of Trump’s first term that was aimed at lifting up poor communities. 

“Opportunity Zones” offered major breaks to investors who pursued projects in low-income communities. The new tax and spending bill makes permanent those opportunity zone tax breaks, which were due to sunset next year. But in Massachusetts and across the country, whether the program delivered much on its promise is still up for debate – a question made even harder to answer by the lack of solid data on projects it has aided. 

Under the initial Opportunity Zone legislation, which enjoyed bipartisan support, in exchange for investing funds to boost projects in low-income census tracts, investors could postpone or reduce taxes on their capital gains or, if they held onto the investment property for at least a decade, not have to pay taxes on those gains at all. 

After the Tax Cuts and Jobs Act passed in December 2017, states across the country jumped at the chance to bring investment interest to their poorest census tracts. State officials were tasked with submitting potential Opportunity Zones to the federal government, limited to 25 percent of their state’s eligible tracts. To be eligible, a census tract had to have median income below a certain threshold or, in some cases, be next door to one than did.  

“We looked at it as an opportunity to direct more investment into communities that were in need of that investment,” said Jay Ash, the housing and economic development chief during Gov. Charlie Baker’s administration at the time. “We prioritized and spent a lot of time on it around the state.” 

Concerns also soon appeared that the policy might provide a tax windfall for deep-pocketed investors on projects that they would have pursued anyway, but not do much to improve communities.  

The state, however, energetically took up the role of middleman between interested communities and the feds. The state housing and economic development office set up a system to deal with the “robust competition” for a limited number of Opportunity Zones spots, Ash said, inviting communities to submit census tract applications, and developing a matrix for deciding the best fits.  

Ash said US Sen. Tim Scott, a Republican co-sponsor of the original legislation, even called the governor to compliment Massachusetts on its approach. 

In 2018, the US Department of the Treasury designated 8,764 census tracts as qualified Opportunity Zones. As Bay State cities and towns scrambled to have their census tracts qualified, certain zones being ignored sparked some local dust-ups. Attorney General Andrea Campbell, at the time a Boston city councilor, complained that the district she represented as a Boston city councilor had been left  out.  

The state landed on 138 Opportunity Zones in Massachusetts, located in 79 communities. So did anything come from them?

“I don’t know,” Ash said. 

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