Per the State of California, the U.S. Investing in Opportunities Act, passed last year as part of the new federal tax bill, created tax incentives for investment in designated census tracts called Opportunity Zones. The statute, introduced with bipartisan sponsors led by Senators Cory Booker (D-NJ) and Tim Scott (R-SC), was designed to spur growth in low-income communities by encouraging reinvestment of capital gains into certified Opportunity Funds.

Opportunity Zones (OZs) are probably best understood not as a new grant program but as a new investment tool – similar to the home mortgage interest deduction that creates tax preferences, which then drive individual and market behavior.

With minor exceptions, the federal statute is not prescriptive in terms of the types of qualified investments, from affordable housing to clean energy to infrastructure to small business to workforce. This provides flexibility – as well as the need – to craft local and state strategies that will focus these investments to ensure they deliver living wage jobs, increase affordable housing, prevent unwanted gentrification and build resilient communities. This work is just beginning and there is time for communities to consider the benefits of the OZ tool, as the U.S. Treasury Department has yet to issue the full set of investment rules. Investors are expected to begin forming Opportunity Funds in the later part of 2018, after the Treasury issues final rules.