The U.S. Treasury Department Wednesday released new regulations for nearly 9,000 “opportunity zones” that officials hope will unleash investment in the economically distressed areas.
Under the 2017 federal tax law, people can get a tax break for investing in certain businesses and properties located in the zones.
Speaking at an event at the White House, Kevin Hassett, chairman of the Council of Economic Advisers, predicted that with the new regulations, “activity is basically going to lift off like a rocket ship.”
Many investors have been waiting for more clarity before striking deals. To maximize their tax savings, investment funds must act this year.
Treasury Secretary Steve Mnuchin said at the White House event that in addition to other changes, the new regulations will ensure that businesses that are headquartered in zones but do most of their sales elsewhere could qualify.
“A lot of people look at the real estate opportunity,” Mnuchin said. “But what we’re really excited about is the chance to build new businesses or expand existing businesses in opportunity zones.”
But some local leaders and national economic development experts have expressed concern that most of the opportunity zone money will be spent in booming cities, and on real estate projects rather than businesses that could create jobs and economic growth over the long term.
Lawmakers in some states are considering bills that would create additional tax breaks to lure investors or encourage certain projects in zones, such as affordable housing or solar energy development.
Hassett said the tax break is already having an effect. Real estate prices in opportunity zones are up 20% since the zones were designated last year, he said, citing Zillow data. And businesses are attracting investment, he said, highlighting a lumber mill in a Vicksburg, Mississippi, zone that recently reopened and started hiring again.