On Wednesday, the Trump administration released the second in a series of rules meant to clarify the use of Opportunity Zones. The 169-page proposal outlines a number of new ways for business owners and other enterprises take advantage of the benefit.
Investors will be able to qualify for breaks even if the businesses they fund focus on exports or domestic markets outside the Opportunity Zone. Long-vacant properties will immediately qualify. Investors will be able to share stakes in funds or sell start-ups as long as the money is re-invested in another asset. And real-estate investors will be allowed to lease and refinance their properties – a provision expected to benefit Native Americans in particular.
According to Jim Tankersley of The New York Times, the rules appear to address concerns from the program’s backers about the use of Opportunity Zones for real estate projects that do not create many permanent jobs or benefit the local communities.
Even before the administration has finished issuing its rules, the zones have become a boon for real estate developers and drawn criticism from people who say they will mostly enrich well-heeled investors and speed up the displacement of low-income residents in gentrifying areas.
Treasury officials have developed a series of tests, in the regulations they began releasing in October, for which investments should qualify for the tax breaks. One key test many local officials use to evaluate the zones is whether the tax breaks encourage job-creating businesses, not just condos, retail stores, hotels and other real estate projects that often don’t create many permanent jobs with opportunities for advancement.
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