Stanford Social Innovation Review
February 7, 2019
The Opportunity Zone tax incentive–passed in amended form as part of the Tax Cuts and Jobs Act of 2017–is a potentially powerful new tool for helping low-income communities. By providing breaks for certain investments in distressed areas, it has already led to the creation of nearly $1 billion in new funds. Officials from the Treasury Department expect $100 billion in private capital will be deployed through the incentive.
But the policy may fail to achieve its goals unless foundations guide investments in the right direction. Their deep experience in struggling local communities around the nation prepares them for the challenge.
Lawmakers passed this policy with the belief that investors don't pay enough attention to the breadth of good financial opportunities available across the United States. But investors may still worry that low-income neighborhoods present more risk than other areas. And they may only use the Opportunity Zone tax break to enhance investments they would have undertaken anyway, rather than pursue potentially lower-return projects that truly help local communities.