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10Jul

How States Can Maximize Opportunity Zones

Our policy brief lays out a plan of action for states to realize the full economic and social potential of this unique tax incentive. To recount, the Tax Cuts and Jobs Act of 2017 provides a new incentive – centered around the deferral of capital gains taxes — to spur private investments in low-income areas designated as Opportunity Zones. Given the significant interest among investors, it is possible that this new tax incentive could attract tens of billions of dollars in private capital, making this one of the largest economic development initiatives in U.S. history.

Governors have already played a critical role by selecting Opportunity Zones in their states from an eligible group of low income census tracts in accordance with the law. But state involvement should not begin and end with designation. States have a complex of powers, resources, assets and relationships which, if smartly and intentionally deployed, could help leverage the Opportunity Zone incentive to shape markets and maximize economic and social outcomes.

To this end, we recommend that states create Opportunity Plans. These Plans should primarily focus on how states can help communities identify and amplify local advantages and design actionable strategies that align with local priorities and needs. Opportunity Plans should contain, at a minimum, seven concrete actions for states to develop and implement:

  1. Help communities design and market an Investment Prospectus to showcase the distinctive assets of — and investable projects — in their Opportunity Zones;
  2. Maximize the economic impact of public institutions of higher learning;
  3. Maximize the economic impact of state assets that are located in or near Opportunity Zones;
  4. Ensure that Zone related infrastructure is of high quality and meets performance standards;
  5. Align state investments and decisions with the distinctive competitive assets and advantages of different Opportunity Zones.
  6. Help local residents obtain skills or competencies necessary to meet existing or likely labor demand; and
  7. Support the production and preservation of affordable/workforce housing.

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