By John Chiang and Peter Weber
Tens of billions of dollars are reportedly being raised nationwide by hedge funds, investment banks, and money managers looking to capitalize on new “Opportunity Zone” tax incentives created by the 2017 federal tax law.
So, what exactly are Opportunity Zones?
They are not a program, but a tool that creates an incentive for investors to transfer capital gains into low-income neighborhoods. Projects that previously did not “pencil out” can now become feasible because Opportunity Zone tax benefits typically increase returns by 3 to 4 percent. The U.S. Treasury has certified 8,700 census tracts as qualified Opportunity Zones (QOZ’s), of which 879 are in California.
While 34 states have already acted to conform their capital gains treatment with federal law, California has yet to do so.
But California is at risk of missing this opportunity to invest in its poorest neighborhoods.