Among the many provisions in the Tax Cuts and Jobs Act (TCJA) is the opportunity zones. They have been created as a tool to support the success of low-income earners in specific communities. This move aims to offer wealthy incentives to investors who can manage to invest in these low economic communities.
With the main aim of establishment of opportunity zone being to stimulate economic development and enhance job creation in the eligible areas (low-income regions), it is paramount that these designated communities take advantage of this initiative. Though, for the objective of opportunity zones to be realized, the relevant professionals, both legal and tax, should adequately equip these communities. Continue reading to unveil the fundamentals of this program and the best way to exploit and grow the opportunities available for these targets.
Based on statistics, it has been proven that the initial ever created tax incentive plan has potentially generated inflow of capital to the distraught communities. Nevertheless, there have been concerns about the possibility of unintended aftereffects of this program. Some of the main concerns are intensity in high-cost metropolises and displacement.
Considering that the reason behind equity capital financing is to maximize return on investment, opportunity zone funding is geared towards financing the distressed regions which are already redeveloping. In such areas, the opportunity zone finances may be used in improving the infrastructure like erecting high-end housing and commercial facilities. Such an approach will lead to the displacement of low-income earners. The concern is, how can we still grab the opportunities to develop the economy without causing major displacement?
Note, equity investments will bring in higher incomes in economically developed areas as dwellers in such regions can afford to keep with the lifestyle. Talk of high rental fees, these habitats will manage to pay. However, concentrating equity capital in these high-priced cities can worsen the situation in these cities. There is a concern about the fairness in investing in the designated qualified opportunity zones. Will the funds be distributed equally in all eligible zones across the program states?
Following the enacting of the opportunity zone program, the governmental and private concerned parties spearheading this initiative ought to come up with a workable plan the soon as possible. There is a need to have data to help in making informed decisions. For accessibility of the essential data, various professionals have come to seal the information gap by introducing interactive tools that picture the present investment activities and connected risks in the eligible zones.
Nevertheless, there are various strategies to strengthen local communities through opportunity zone investments. All that is required is for the key implementers to align themselves with community leaders properly, investors, and local intermediaries. Otherwise, attaining the objective of strengthening communities in the demarcated areas will be impossible. However, outsiders tend to overlook the rooted and complex histories of neighborhoods that interlink with housing, business, and the employment market. Besides, failing to incorporate the leadership at the community level will be a challenge when it comes to getting the attention and commitment of the right stakeholders.