Trump tax breaks for low-income neighborhoods draw scrutiny

Trump tax breaks for low-income neighborhoods draw scrutiny
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A section in President TrumpDonald John TrumpWhite House sued over lack of sign language interpreters at coronavirus briefings Wife blames Trump, lack of masks for husband's coronavirus death in obit: 'May Karma find you all' Trump authorizes reduced funding for National Guard coronavirus response through 2020 MORE’s tax law aimed at revitalizing economically distressed communities is receiving increased scrutiny from lawmakers. 

The GOP tax law, enacted in late 2017, created the “opportunity zones” program, which provides capital gains tax breaks to those who make investments in certain low-income census tracts.

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There is broad bipartisan support for the objectives behind opportunity zones and interest from lawmakers on both sides of the aisle in providing more transparency via reporting requirements about the investments made.

But Democrats are pushing for more substantive changes to the program and have become increasingly concerned about opportunity zones in recent weeks, following news reports highlighting how wealthy developers are influencing and benefiting from the program.

“Reporting is not sufficient to ensure that tax revenue is forfeited only if the intended public purpose is fulfilled,” a group of Democratic lawmakers in the Congressional Black Caucus wrote in a letter Monday. Signers of the letter include House Majority Whip James Clyburn (D-S.C.) and Sens. Cory BookerCory Anthony BookerUSAID appointee alleges 'rampant anti-Christian sentiment' at agency OVERNIGHT ENERGY: EPA rule extends life of toxic coal ash ponds | Flint class action suit against Mich. officials can proceed, court rules | Senate Democrats introduce environmental justice bill Senate Democrats introduce environmental justice bill MORE (D-N.J.) and Kamala HarrisKamala Devi HarrisCuba spells trouble for Bass's VP hopes Biden should pick the best person for the job — not the best woman Trump adviser Jason Miller: Biden running mate pick 'his political living will' MORE (D-Calif.), who are both running for president.

The opportunity zone portion of the GOP tax law provides several different types of capital gains tax breaks to investors in the zones. The program was based on bipartisan legislation that had been introduced by Sen. Tim ScottTimothy (Tim) Eugene ScottLobbyists see wins, losses in GOP coronavirus bill Revered civil rights leader Rep. John Lewis lies in state in the Capitol GOP plan would boost deduction for business meals MORE (R-S.C.) and Booker.

Investors who realized capital gains and then rolled over the gains into “opportunity funds” investing in the zones can temporarily defer taxes on those existing gains. If investors hold their previously earned capital gains in opportunity funds for at least 5 years, they pay less in taxes on the investments. And if investors hold investments in opportunity funds for at least 10 years, they don’t have to pay any capital gains taxes on new gains produced by those investments.

The opportunity zone provision is one of the portions of the tax law that Trump likes to highlight. In a speech last week at the Economic Club of New York, Trump called opportunity zones “one of the biggest successes that you’ve ever seen.”

But the program, which is still in its early stages, is drawing concerns from Democrats that it lacks enough rules, amid stories highlighting specific zones and projects that critics think are problematic.

Some articles and think-tank studies have drawn attention to specific areas designated as opportunity zones, including areas included in zones because they are adjacent to low-income census tracts, areas that are already gentrifying and areas that are in college towns that aren’t disadvantaged but appear to be low income because much of their populations are students. There have also been several reports about areas being designated as opportunity zones after developers lobbied government officials.

One specific zone that has drawn criticism is in Storey County, Nevada. The New York Times reported last month that Treasury Secretary Steven MnuchinSteven Terner MnuchinTrump won't say if he disagrees with Birx that virus is widespread On The Money: Democratic leaders report 'some progress' in stimulus talks | Prosecutors hint at probe into 'possibly extensive and protracted criminal conduct at the Trump Organization' Democratic leaders report 'some progress' in talks with White House MORE instructed the department to designate the area as a zone — after it had been previously determined to be ineligible — after spending time with former “junk bond king” Michael Milken, who co-owns a company that holds land in the area. Treasury said that Mnuchin was unaware of Milken’s investments in Storey County and that the decision to reexamine the zone came at the request of Nevada politicians.

There have also been reports that focus on specific investments being made in opportunity zones that critics say aren’t benefiting low-income residents of the areas, such as investments in luxury apartment buildings.

A Treasury department spokesperson said opportunity zones “were defined by Congress as low-income areas in accordance with census data, and chosen by state and local leaders.” The spokesperson noted that census tracts that are in opportunity zones because they are adjacent to low-income areas also were subject to income restrictions and argued that critics of the program are cherry-picking and vilifying specific projects.

Democrats in Congress have taken a number of actions in recent weeks to increase oversight and impose more guardrails over the program.

Some of their efforts have focused specifically on the Storey County zone. House Ways and Means Committee Chairman Richard NealRichard Edmund NealConservatives urge Trump to take unilateral action to suspend payroll tax collection Treasury to conduct policy review of tax-exempt status for universities after Trump tweets Stimulus checks debate now focuses on size, eligibility MORE (D-Mass.) and Senate Finance Committee ranking member Ron WydenRonald (Ron) Lee WydenFrustration builds as negotiators struggle to reach COVID-19 deal On The Money: Unemployment benefits to expire as coronavirus talks deadlock | Meadows, Pelosi trade criticism on stalled stimulus talks | Coronavirus recession hits Social Security, Medicare, highway funding Unemployment benefits to expire as coronavirus talks deadlock MORE (D-Ore.) sent a letter to Mnuchin earlier this month seeking information about how the decision was made to designate Storey County.

Neal, Wyden, Rep. John LewisJohn LewisIn Black communities, changing how we treat diabetes is imperative Juan Williams: The Trump Show grows tired Don't let Trump distract us from the real threat of his presidency MORE (D-Ga.) and Booker have also asked the Government Accountability Office to issue a report on the census tracts designated as opportunity zones and Treasury’s implementation of the program, while Booker and Reps. Emanuel Cleaver (D-Mo.) and Ron KindRonald (Ron) James KindDemocrats exit briefing saying they fear elections under foreign threat Bottom line Coronavirus culture war over reopening economy hits Capitol Hill MORE (D-Wis.) have asked the Treasury inspector general to review its implementation.

Wyden has also introduced legislation that would terminate zones that are not low-income and specify that investments for certain types of projects, such as sports stadiums and luxury apartments, don’t qualify for the tax incentives. Similar legislation has been introduced in the House by Clyburn.

More Democratic efforts could be on the way.

A spokeswoman for Neal said that the Ways and Means Committee could hold a hearing on opportunity zones in the future.

Rep. Alexandria Ocasio-CortezAlexandria Ocasio-CortezTrump campaign rolls out TV spots in early voting states after advertising pause Trump adviser Jason Miller: Biden running mate pick 'his political living will' 'Squad' member Rashida Tlaib faces strong primary challenger MORE (D-N.Y.), a prominent progressive, said that she’s been talking to other lawmakers about opportunity zone legislation.

“I don’t have it right on the docket right now, but it’s definitely an area of policy that I think we need to address,” she told reporters Friday. She expressed concerns that “opportunity zones aren’t satisfying the actual intent behind which they were created.”

There is interest from Republicans in making some improvements to the opportunity zones programs as well.

Bipartisan legislation has been introduced in the House and Senate to boost reporting requirements. Stand-alone bills on opportunity zones that predated the 2017 tax law had reporting requirements, but those requirements were not included in the GOP tax law because of the budget rules used to pass the bill in the Senate with only a simple-majority vote.

The Treasury Department and IRS late last month released a draft form to collect information about the amount of investments that opportunity funds are making by census tract.

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Republicans have continued to praise opportunity zones and are critical of legislation like those from Wyden and Clyburn.

Scott blasted the legislation in a statement last week, saying that it would “needlessly punish low-income communities who are hoping to use Opportunity Zones to transform areas left behind.” He argued that legislation would terminate some zones with significant poverty rates and that only a small percentage of zones are in gentrifying areas.

A White House spokesperson said that since Treasury is still working on final rules to implement opportunity zones, “it’s premature to make drastic changes to legislation that so far has created amazing results.” The spokesperson pointed to planned opportunity zone investments in affordable housing, technology startups and rural health centers.

But Democrats are keeping up their pressure.

Rep. Wm. Lacy ClayWilliam (Lacy) Lacy ClayGrim: Past voting record could make August primary tough for Missouri Rep Black Lives Matter activist Cori Bush on running for Congress: 'We have to have progressive change' GOP House candidate publishes 23-page report claiming George Floyd death was deepfake video MORE (D-Mo.), a co-sponsor of Clyburn’s bill, said Scott should be more open to changes like those in his legislation.

“I don’t want opportunity zone tax [breaks] used for a soccer stadium. I think that was not the original intent of Mr. Scott,” Clay told reporters Friday.