Lawmakers from both houses of Congress have introduced new legislation aimed at increasing transparency and accountability for the federal Opportunity Zone program.
Legislators acted after media reports highlighted alleged moves by Trump administration officials to benefit known associates such as Michael Milken, the disgraced former financier with close ties to U.S. Treasury Secretary Steven Mnuchin. The New York Times cited one instance where an area in which Milken is a “major investor” was selected as an opportunity zone, ignoring federally set guidelines for making that designation.
In the Senate, Ron Wyden, D-Oregon, introduced the Opportunity Zones Reporting and Reform Act of 2019. Co-sponsored by Sens. Michael F. Bennet, D-Colorado, and Angus S. King Jr., I-Maine, the legislation amends the Internal Revenue Code to require reporting for qualified opportunity funds and terminate opportunity zones that don’t qualify for low-income or impoverished status.
“The Opportunity Zone program has been troubled from the start,” Wyden said. “The Treasury Department has been steering potentially billions [of dollars] in tax breaks to Donald Trump’s friends, and there are no safeguards to ensure taxpayers are not simply subsidizing handouts for billionaires with no benefit to the low-income communities this program was supposed to help.”
Simultaneously, the House is drafting a similar oversight attempt with the Opportunity Zone Reform Act. Introduced by House Majority Whip James Clyburn, D-South Carolina; Rep. Alma Adams, D-North Carolina; and Rep. William Lacy Clay, D-Missouri, the bill is a House companion to nearly identical sections of the Opportunity Zone Reporting and Reform Act. It is aimed at tightening existing transparency regulations, terminating opportunity zones that aren’t deemed low income, and allowing states to replace zones ended in such fashion.
“From the start, I’ve raised concerns that the opportunity zone incentive would turn out to be a tax credit for rich investors with limited benefits for low-income communities,” Clyburn said. “This program needs to be tweaked if it is to accomplish its stated purpose, and this legislation makes the necessary reforms to ensure it is making an impact in the communities that need investments the most.”
Meanwhile, the U.S. Department of Housing and Urban Development (HUD) continues to encourage residential real estate investment in the zones. It announced that it is raising the ceiling in opportunity zones for the Federal Housing Administration’s limited 203(k) loan program from $35,000 to $50,000. Although much of the focus for opportunity-zone investments thus far has been on commercial buildings and multifamily housing, HUD Secretary Ben Carson said that the change will give families in such areas “a path to financing that makes it realistic to do the repairs and improvements that will uplift the entire community.”
