Representative Alexandria Ocasio-Cortez (D-NY) has upped the ante for progressives by introducing an amendment to a House spending package that would defund the “opportunity zone” (OZ) program initiated by President Trump. The modification would affect Trump’s historic 2017 tax plan that tagged legislation that paved the way for private investors to revitalize impoverished communities. Ocasio-Cortez and other progressives believe these investors, instead of putting money into the communities, are using the law to enrich themselves.
For those who tend to steer away from scrutinizing every detail of passing legislation, a qualified opportunity zone is described by the Internal Revenue Service as:
“An economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as QOZs if they have been nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service (IRS).”
A previous attempt to deprive the opportunity zones was made in 2019 by Rep. Rashida Tlaib (D-MI), but the quest was Quixotic at best. Although several checks and balances were written into the tax law, as it is with even the tiniest of loopholes, there will be folks trying to squeeze on through to line their own pockets.
The 2020 Do-Over
It was a simple plan with a short trek to revitalization. Each state nominates its low-income areas, which are then approved by the United States Treasury. According to an article in Forbes, “[t]hrough the IRS, investors can file a Form 8896 to create a Qualified Opportunity Fund — vehicles structured as either a partnership or corporation to invest in an OZ census track, whether in real estate or directly in businesses through equity.”
Taxpayers then sell an asset to generate capital gain and funnel that profit into a qualified OZ fund.
It’s a great idea. Until Pro Publica wrote a bit of an expose and sent Democrats — who were iffy to start – into a death spiral over wealth and privilege. One of those loophole-squeezers, financier Michael Milken, with the help of then Florida Governor Rick Scott, ended up with an OZ for a superyacht marina in West Palm Beach, Florida. Yes, sometimes people take advantage of an opportunity to reinvigorate down-trodden communities in order to fund their own purchases of more cases of Cristal.
The progressives caught a whiff of impropriety and are now attempting to discolor the entire program.
Shine the Light Already
The OZs are a great idea for pouring money into seriously poor neighborhoods and communities. Since the inception of the law, stories have surfaced, much like Milken’s, of abuse. And those situations must be ferreted out and overturned. But to ax the entire program is akin to cutting off one’s nose to spite one’s face. Poor communities need the dollars of the rich. The rich need incentive to part with their cash.
Sen. Tim Scott (R-SC), a man who was born into poverty and fought his way out, is the man behind the program. He and several other members of Congress – Sen. Cory Booker (D-NJ) and Reps. Pat Tiberi (R-OH) and Ron Kind (D-WI) – drafted an earlier version of legislation that became part of Trump’s Tax Cuts and Jobs Act. One wonders if they will stand with Ocasio-Cortez or stick to the law, though it may need some overhauling and oversight on the state level.
Read more from Sarah Cowgill.