Column: ‘Opportunity Zones’ on their way
As part of the landmark reform of our outdated tax code, a bipartisan provision was included that I championed known as Opportunity Zones.
Opportunity Zones are economically distressed rural and urban areas eligible for tax benefits aimed at spurring private investment, economic growth and local jobs. The goal of this bipartisan economic development program is to bring long-term, private-sector investment to the places and people who need it most.
For many years the tax code has provided various tax incentives to encourage economic development in low-income communities. In my neck of the woods down in southwest Michigan, local development groups have a strong track record of leveraging these programs to benefit our communities. For example, the New Market Tax Credit – a tax incentive development program enacted in 2000 — helped finance Kalamazoo Valley Community College’s Health Focused Campus, which serves 9,000 students annually.
Despite these efforts, communities in Michigan and across the country still lag behind in business and job growth. In fact, more than half of the nation’s struggling zip codes contained fewer jobs and businesses in 2015 than they had in 2000. It’s time for new innovative approaches to bring investment to these areas. That’s where Opportunity Zones come in – the first new community development tax incentive program signed into law since the Clinton Administration.
Here’s how it works: Governors identify a limited number of Opportunity Zones in areas most in need. States are required to consider local economic development initiatives and successes with other programs to ensure Opportunity Zone designations equal local results. Next, tax benefits are offered for reinvesting prior gains into Qualified Opportunity Funds. These funds must hold at least 90 percent of their assets into Opportunity Zone properties – everything from a local startup to an affordable housing project. The tax benefit hinges on the length of the investment to ensure long-term, sustained, and local development.
In good news, The U.S. Treasury Department and Internal Revenue Service recently approved the state of Michigan’s application for Opportunity Zones. Michigan was one of only 18 states approved. This first set includes cities and townships throughout Michigan — 24 designations in my district alone.
The IRS is currently working on guidance related to Opportunity Funds and eligible investments. Here at home, local leaders and organizations are already thinking of ways to put the program to good use.
Thanks to tax reform enacted this year, we’ve seen historic investment in our local economies, tax cuts for middle-class families, and more money in worker paychecks. Now, with Opportunity Zones we’re seeing more opportunities to build more businesses and create more local jobs. These Opportunity Zones have great potential for entrepreneurs and businesses looking to get ahead here in southwest Michigan. They offer a fresh way to grow our communities from the ground up. It’s time to make growing and rebuilding Main Street a priority.
You can see the full list of cities and township who have been approved for the Opportunity Zone designation and learn more about tax reform on my website.
U.S. Rep. Fred Upton, R-St. Joseph, represents Michigan’s 6th Congressional district.