Novogradac Working Group Urges Trump Transition Team to Strengthen OZ Incentive
A letter from the Novogradac Opportunity Zones Working Group to incoming President Donald Trump’s transition team and the nominee for deputy secretary for the U.S. Department of the Treasury – Michael Faulkender – calls for the Trump administration to consider regulatory and legislative efforts to enhance and reinforce the opportunity zones incentive, including permanency in the Internal Revenue Code.
In the letter, the working group reminded Faulkender and the team that it had been working with the OZ incentive since well before its enactment, going as far back as its original introduction in the U.S. House of Representatives.
Membership of the working group includes investors, syndicators, lenders, qualified opportunity funds, community development entities, community development financial institutions, for-profit and nonprofit developers, consultants, accountants, attorneys, and other community development stakeholders who work together to suggest consensus solutions to technical OZ incentive issues and provide recommendations to make the OZ incentive more efficient in delivering benefits to low-income communities.
Since its enactment in 2017 as part of the Tax Cuts and Jobs Act, Novogradac said the OZ incentive has been a driving force behind a substantial influx of private capital into low-income communities throughout the nation.
It reported a significant surge in investment during the third quarter of 2024 when the funds raised $1.24 billion in additional capital. Also, according to the Joint Committee on Taxation, the OZ incentive has generated nearly $85 billion in qualified opportunity zone investments through 2022.
In November, The DI Wire’s publisher hypothesized that opportunity zones might find themselves to be the real winner of the November election.
The working group stressed that great care should be taken going forward to ensure that any regulatory or statutory modifications do not suppress the continuing momentum of the OZ incentive and “thus the flow of capital that is desperately needed in these disadvantaged communities.”
Among the working group’s proposals are to extend the deadline for OZ investment beyond 2026 and to enable smaller and more flexible investment.
The Opportunity Zones Transparency, Extension, and Improvement Act (OZTEIA, H.R. 5761) OZTEIA would extend the capital gains investment deadline and deferral period for qualifying investments to 2028. According to the working group, the change would recoup time lost during regulatory implementation and pandemic disruption, as well as create an incentive for investors to invest in distressed communities as states are going through the process of selecting new or continuing the designation of existing zones.
The legislation would also allow for a “fund of funds” model in OZ investing. The letter discusses how qualified opportunity fund would be able to invest in other qualified opportunity funds, which would create opportunities for smaller, regionally focused, impact-oriented funds to raise capital and overcome scale challenges with institutional investors to receive needed financing.
The letter also calls for OZ permanence and for rolling deferral periods. Read the full letter.
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