Summary of Opportunity zones of the 2017 Tax Cuts and Jobs Act. This presentation includes history, mechanics, mission, inputs, activities, outputs, outcomes, mechanism mapping logic model, internal and external validity threats.

1. Opportunity Zones
of the 2017 Tax Cuts
and Jobs Act II

2. Michael-Paul James
Presentation on
H.R.1 - An Act to provide for reconciliation pursuant to titles II and V of the concurrent
resolution on the budget for fiscal year 2018, Subchapter Z—Opportunity Zones
In service of PPOL 8630: Advanced Program Evaluation
With Dr. Jacqueline Chattopadhyay
2

3. 1.
Remind the class about the basics
of the program.
3

4. ✘ U.S. Communities display dramatic variation in amenity and resource.
✘ Communities feel overlooked over when the country’s, state’s, and city’s
resources are concentrated in already burgeoning areas.
✘ Economic recovery from 2008 has widened the poverty gap.
✘ Areas of persistent poverty have fallen behind and need new investments,
new businesses, and new good paying jobs.
✘ Government does not have the resources to responsibly address concerns.
✘ Investors are reluctant to invest due to risk associated with blighted areas.
✘ Investing in Opportunity Act motivates private capital to these
communities by rewarding financial risk associated with development.
4
Overview of the Problem

5. Target Population
✘ Low-income census tracts with poverty rate >20%
✘ Median family income <80% of the area median income (AMI)
✘ States eligible to nominate 25% of its eligible census tracts
✘ Up to 5% of 25% can be comprised of contiguous census tracts
adjacent to LIC assuming adjacent census tracts < 125% of the
median family income of the adjacent low-income community.
5

6. Deferred Gain
Original investment
6
Basis
Gain
Sold
Basis
Gain
Tax
Free
QOF
Tax paid later

7. 7
Tax Treatment
Taxable Gain
Step Up
Basis
$500,000
$1,000,000
$1,500,000
$2,000,000
0 1 2 3 4 5 6 7 8 9 10 11
TotalQOFInvestmentValue
End of Year

8. 2.
Describe what type of needs
assessment was done before the
program was developed.?
8

9. Post-Financial Crisis
✘ Stagnant wage growth from 2009-2015
✘ Uneven recovery rates with historically low investments and
persistent long-term unemployment
✘ Consolidation of resources has left growth gaps.
9

10. Analysis
✘ Single metric of economic distress: official poverty rate
✘ Observational Studies, data collection, and literature reviews
✘ Spatial analysis of unemployment saw 10% swings in neighbors.
✘ Job loss studies show link to mortality, such as death, suicide,
and cancer, and social costs, such as divorce and education.
✘ The time of unemployment lowers chance of reemployment.
10

11. 3.
Was any sort of formative
evaluation done in the early
stages of the program?
11

12. Formative EvaluationFormative Evaluations
Nope
✘ No formative evaluations were completed.
✘ Decision left up to governors conducted behind closed doors.
✘ The convenient poverty definition and loose implementation
allowed for significant variation.
12

13. Formative EvaluationFormative Evaluations
✘ Tax expenditure operating like a spending program.
✘ Oversight of Treasury, and IRS neither is required to evaluate the
effectiveness of incentives nor do they typically evaluate these
types of programs.
✘ The benefits are local and local policymakers will claim credit
assuring its popularity regardless of its success.
✘ Place based programs need must be evaluated to be understood.
✘ Logic models and mapping are necessary to determine likely
causes of success and failure. Without intention, nothing is learned.
13

14. Formative EvaluationFormative Evaluations
✘ Other place-based tax initiatives
○ Empowerment Zones and Enterprise Communities Act of 1993
■ Three waves in 1994, 1998, 2001
■ Empowerment Zones (EZ) Employment Credit
■ Increased Section 179 Deduction
■ Enterprise Zone Facility Bonds (Enterprise Community, EC)
■ Empowerment Zones (EZ) Facility Bonds
■ Non-recognition of Gains on the Sale of EZ Assets
■ Partial Exclusion of Gain on the Sale of EZ Stock
■ GAO: IRS struggled identify locations where credits were used… oops
○ Community Renewal Tax Relief Act of 2000 (40 communities)
■ Consolidated Appropriations Act, 2001
■ Renewal Community (RC) Employment Credit
■ Commercial Revitalization Deduction (RC)
■ Zero Percent Capital Gains Rate for RC Assets
14

15. 4.
Was the program monitored
during implementation?
15

16. Nope
16
Investing in Opportunity Act by Senators Booker
and Scott contained requirements for the
Treasury to submit an annual report starting the
fifth year of the program. The requirement was
removed when added to the Tax Cuts and Jobs Act.
Unofficially...

17. 17
Distress Index Poverty Rate Child Poverty
Percent with Some
College
Median Home Value Change in Income
High Price
Appreciation
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Alabama 0.65 0.67 23% 26% 38% 43% 45% 48% 98,159 103,146 3% 4% 28% 23%
Alaska 0.75 0.74 15% 14% 25% 23% 54% 54% 183,575 174,829 -1% 10% 15% 24%
Arizona 0.74 0.76 24% 27% 38% 41% 47% 48% 116,191 112,496 3% 3% 26% 18%
Arkansas 0.64 0.72 22% 26% 37% 40% 45% 43% 94,159 90,520 3% 11% 23% 23%
Alabama 0.65 0.67 23% 26% 38% 43% 45% 48% 98,159 103,146 3% 4% 28% 23%
Alaska 0.75 0.74 15% 14% 25% 23% 54% 54% 183,575 174,829 -1% 10% 15% 24%
Arizona 0.74 0.76 24% 27% 38% 41% 47% 48% 116,191 112,496 3% 3% 26% 18%
Arkansas 0.64 0.72 22% 26% 37% 40% 45% 43% 94,159 90,520 3% 11% 23% 23%
DC 0.67 0.78 19% 26% 30% 39% 57% 48% 392,672 298,002 15% 8% 24% 14%
Florida 0.73 0.84 20% 28% 34% 43% 48% 40% 123,725 106,290 2% 4% 19% 17%
Georgia 0.63 0.87 20% 34% 34% 54% 49% 39% 117,173 86,475 3% 2% 20% 28%
Hawaii 0.76 0.84 15% 16% 25% 25% 59% 50% 386,894 385,953 7% 10% 17% 10%
Idaho 0.73 0.72 18% 18% 30% 29% 58% 54% 137,080 144,103 6% 16% 25% 36%
Illinois 0.69 0.85 17% 29% 29% 46% 50% 45% 144,590 110,815 4% 4% 21% 19%
Indiana 0.71 0.73 21% 23% 35% 38% 46% 46% 90,857 96,712 3% 8% 14% 25%
Iowa 0.72 0.81 16% 19% 25% 30% 54% 50% 110,099 90,887 8% 8% 13% 30%
Kansas 0.72 0.73 18% 19% 29% 28% 52% 55% 90,352 90,558 5% 6% 21% 29%
1. Gelfond, Hilary, and Adam Looney, "Learning from Opportunity Zones: How to improve place-based policies" The Brookings Institution, October 2018

18. 18
Kentucky 0.67 0.74 23% 27% 0.36 0.41 43% 41% 97342 91387 6% 6% 0.23 0.3
Louisiana 0.64 0.72 24% 29% 0.39 0.44 44% 41% 119972 108810 2% 4% 0.22 0.29
Maine 0.73 0.73 18% 17% 0.28 0.31 51% 53% 144252 130884 3% 9% 0.27 0.19
Maryland 0.72 0.76 11% 15% 0.21 0.26 52% 51% 206241 188386 3% 5% 0.19 0.16
Massachusetts 0.76 0.8 16% 19% 0.28 0.3 51% 49% 281165 247537 7% 7% 0.26 0.19
Michigan 0.73 0.73 24% 25% 0.38 0.39 50% 52% 81090 79717 4% 3% 0.13 0.14
Minnesota 0.71 0.84 13% 20% 0.23 0.32 59% 54% 152895 135919 7% 10% 0.19 0.17
Mississippi 0.63 0.56 26% 25% 0.42 0.4 46% 51% 85360 103535 3% 5% 0.24 0.4
Missouri 0.69 0.75 19% 24% 0.32 0.38 48% 48% 102424 97562 4% 5% 0.22 0.3
Montana 0.7 0.8 19% 22% 0.29 0.34 59% 56% 169550 143120 7% 4% 0.29 0.23
Nebraska 0.76 0.79 16% 20% 0.28 0.3 54% 51% 101524 95024 4% 6% 0.17 0.2
Nevada 0.77 0.84 21% 27% 0.35 0.41 43% 39% 118765 116139 -1% -3% 0.21 0.35
New Hampshire 0.77 0.81 10% 12% 0.18 0.23 54% 52% 183045 176669 5% 5% 0.23 0.12
New Jersey 0.78 0.83 17% 21% 0.29 0.34 45% 41% 235020 247926 1% 3% 0.19 0.27
New Mexico 0.7 0.68 25% 24% 0.39 0.39 49% 49% 123810 125632 2% 3% 0.27 0.26
New York 0.72 0.79 21% 26% 0.33 0.39 48% 46% 368780 347986 6% 10% 0.29 0.34
North Carolina 0.69 0.76 20% 24% 0.34 0.39 51% 48% 123475 116526 4% 5% 0.27 0.27
North Dakota 0.69 0.84 12% 19% 0.22 0.26 65% 57% 145218 100147 -4% 22% 0.04 0.12
Distress Index Poverty Rate Child Poverty
Percent with Some
College
Median Home Value Change in Income
High Price
Appreciation
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected

19. 19
Ohio 0.71 0.76 23% 27% 0.38 0.42 46% 44% 90272 89763 3% 9% 0.17 0.21
Oklahoma 0.72 0.74 22% 23% 0.35 0.36 47% 47% 88751 84645 5% 4% 0.21 0.28
Oregon 0.73 0.73 19% 20% 0.3 0.31 58% 59% 201753 200877 8% 9% 0.17 0.24
Pennsylvania 0.73 0.83 19% 27% 0.31 0.42 43% 42% 117932 96360 5% 8% 0.24 0.29
Rhode Island 0.81 0.78 22% 20% 0.36 0.33 44% 47% 173888 191836 6% 2% 0.07 0.16
South Carolina 0.69 0.76 21% 25% 0.36 0.41 46% 44% 107089 98390 5% 9% 0.26 0.26
South Dakota 0.76 0.74 21% 21% 0.32 0.32 53% 54% 97910 101731 4% 5% 0.12 0.2
Tennessee 0.7 0.75 22% 26% 0.37 0.41 43% 41% 109084 110239 3% 9% 0.23 0.29
Texas 0.7 0.75 22% 24% 0.36 0.38 43% 40% 104107 93252 7% 7% 0.19 0.28
Utah 0.77 0.85 15% 18% 0.26 0.3 60% 56% 173597 158179 4% 4% 0.14 0.21
Vermont 0.75 0.82 13% 16% 0.22 0.27 55% 55% 197704 174715 8% 6% 0.32 0.23
Virginia 0.71 0.75 14% 17% 0.24 0.29 52% 52% 180665 181733 4% 3% 0.24 0.24
Washington 0.74 0.8 16% 19% 0.26 0.29 57% 54% 203211 197210 6% 9% 0.19 0.22
West Virginia 0.68 0.58 21% 21% 0.34 0.33 39% 44% 90609 116251 2% 8% 0.27 0.22
Wisconsin 0.74 0.8 18% 23% 0.29 0.36 51% 51% 123949 116259 4% 6% 0.17 0.25
Wyoming 0.77 0.73 14% 14% 0.23 0.24 62% 61% 148346 167975 -5% 5% 0.31 0.21
Distress Index Poverty Rate Child Poverty
Percent with Some
College
Median Home Value Change in Income
High Price
Appreciation
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected
Not
Selected
Selected

20. 20
Share of Opportunity Zone Designations from the
Most Distressed 20 Percent of Neighborhoods

21. 21
Difference in Gentrification (Price Appreciation)
between Selected and Not Selected Tracts

22. 22
% residents college enrolled Official Poverty Rate Census Tract
University of Southern California 99% 88% 222700
Indiana University of Pennsylvania 99% 90% 961102
Illinois State University 99% 87% 200
Liberty University 97% 49% 1400
California State University, Northridge 96% 65% 115103
University of Kansas 96% 61% 400
Western Illinois University 96% 78% 10500
University of Illinois Urbana-Champaign 96% 85% 401
University of Maryland 96% 70% 807200
University of Rhode Island 95% 56% 51400
University of Illinois Urbana-Champaign 95% 78% 5900
Auburn University 94% 75% 40700
University of Illinois Urbana-Champaign 94% 89% 402
Northern Illinois University 94% 75% 2200
Creighton University 93% 37% 1600
University of Wyoming 92% 66% 963500
University of Southern California 92% 84% 224700
Bridgewater State University 91% 33% 561200
Georgia Southern University 91% 74% 110404
New Mexico State University 90% 66% 1000
California State University, Fresno 90% 76% 5408
CollegeTownsPicked
asOpportunityZones

23. 5.
How strong of a connection do you
see between the needs assessment,
the program inputs, the program
outputs, and the program
outcomes?
23

24. Inputs Outputs OutcomesConnection
✘ Original intent is to reverse the massive consolidation of wealth into
shrinking number of communities since 2008 and aid struggling
communities that continue to decline in a thriving economy.
✘ Inputs: private funds, tax relief regulation, and marketing
✘ Outputs: Opportunity Zone Map, tax refunds and deferment.
✘ Outcomes lower tax revenue, new development, better standard of
living for those in poverty.
✘ Outcomes are questioned due the appearance that some states
are using funds to accelerate gentrification and prop up university
living.
24

25. 6.
What recommendations would you
have for program revision?
25

26. Accountability, Evaluation, IntentRevisions
✘ Evaluate selection criteria of target populations with a broader
understanding of poverty, excluding students and gentrifying areas.
✘ Require Annual Reports and require data collection to determine
which OZ produced the desired outcomes and which did not.
✘ Set up a longitudinal study with treatment and control groups to
determine the long term effect on both employment and progeny
of Opportunity Zones.
✘ Strategize and collect data to complete a cost benefit analysis in 5
and 10 years.
26

27. You are Amazing!
Ask me all the questions you desire. I will do my
best to answer honestly and strive to grasp
your intent and creativity.
… and don't forget to wash your hands.
27

28. Citations
✘ Classen, Timothy J., and Richard A. Dunn. “The Effect of Job Loss and Unemployment Duration on Suicide Risk in the
United States: a New Look Using Mass‐layoffs and Unemployment Duration.” Health Economics 21, no. 3 (March
2012): 338–350.
✘ Classen, Timothy J., and Richard A. Dunn. “The Effect of Job Loss and Unemployment Duration on Suicide Risk in the
United States: a New Look Using Mass‐layoffs and Unemployment Duration.” Health Economics 21, no. 3 (March
2012): 338–350.
✘ Lynge, Elsebeth. “Unemployment and cancer: a literature review.” IARC scientific publications 138 (1997): 343-51
✘ Shimer, Robert. “The Probability of Finding a Job.” American Economic Review 98, no. 2 (May 1, 2008): 268–273.
✘ Gelfond, Hilary, and Adam Looney, "Learning from Opportunity Zones: How to improve place-based policies" The
Brookings Institution, October 2018
✘ Eastman, Scott. “Measuring Opportunity Zone Success.” Tax Foundation, June 27, 2019.
https://taxfoundation.org/measuring-opportunity-zone-success/.
✘ Staff. “Opportunity Zones.” Opportunity Zones | U.S. Economic Development Administration. Accessed March 3,
2020. https://www.eda.gov/opportunity-zones/.
28

29. Citations
✘ "H.R.1 - An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget
for fiscal year 2018." Congress.gov. December 22, 2017. Retrieved March 3, 2020.
✘ Staff. “Opportunity Zones Frequently Asked Questions.” Internal Revenue Service. Accessed March 3, 2020.
https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions.
✘ Staff. “Opportunity Zones Facts and Figures.” Economic Innovation Group. Accessed March 3, 2020.
https://eig.org/opportunityzones/facts-and-figures.
✘ Levine, Jeffrey. “Using Qualified Opportunity Zone Funds To Avoid Capital Gains.” Nerd's Eye View | Kitces.com,
March 2, 2020.
https://www.kitces.com/blog/qualified-opportunity-zone-qoz-fund-qof-defer-avoid-capital-gains/.
✘ Brzeski, Jan B, and Kevin Zvargulis. “Opportunity Zone Investment vs. 1031 Exchange.” ARIXA CAPITAL. Accessed
March 3, 2020. https://www.arixacapital.com/opportunity-zone-investment-vs-1031-exchange#.
✘ Staff. “Review of HUD Policy in Opportunity Zones.” Federal Register, April 17, 2019.
https://www.federalregister.gov/documents/2019/04/17/2019-07682/review-of-hud-policy-in-opportunity-zone
s.
29

30. Citations
✘ Staff. “Staff Statement on Opportunity Zones: Federal and State Securities Laws Considerations.” SEC Emblem,
June 26, 2019.
https://www.sec.gov/page/staff-statement-opportunity-zones-federal-and-state-securities-laws-consideratio
ns.
✘ Joint Committee on Taxation, “Estimated Budget Effects of the Conference Agreement for H.R. 1, The ‘Tax Cuts and
Jobs Act.’” 6
✘ Scott Eastman and Nicole Kaeding, “Opportunity Zones: What We Know and What We Don’t,” Tax Foundation, Jan. 8,
2019, https://taxfoundation.org/opportunity-zones-what-we-know-and-what-we-dont/.
✘ Jared Bernstein and Kevin A. Hassett, “Unlocking Private Capital to Facilitate Economic Growth in Distressed
Areas,” Economic Innovation Group, April 2015,
https://eig.org/wp-content/uploads/2015/04/Unlocking-Private-Capital-to-Facilitate-Growth.pdf.
✘ Sullivan, Daniel, and Till Wachter. “Job Displacement and Mortality: An Analysis Using Administrative Data.”
Quarterly journal of economics cxxiv, no. 3 (August 1, 2009): 1265–1306.
http://search.proquest.com/docview/37201012/.
30

31. 31
Appendix

32. 32
Sale of
Property
Tax Benefits
Gain from Prior
Sale is Deferred
10% Basis
Step-Up on
Deferred Gain
5% Basis Step Up
on Deferred Gain
Basis Step-Up to
Fair Market Value
of Qualified
Opportunity Fund
< 180 Days
Prior to QOF
Investment
Prior
Investment
Gain
Reinvested
into QOF
QOF
Investment
5+ Years
QOF
Investment
7+ Years
Sale of QOF
Investment
after 10+ Years

33. Funds; additional
staff; bipartisan
collaboration
Define, draft, pass
OZ Act; Nominate-
designate OZ
tract; educate
agencies,
investors, & tax
professionals;
Opportunity Zone
Map, IRS, SEC,
HUD, and EDA
white papers, web
tools
Lower tax
revenue,
increased
development and
private
investment in OZ
Increased access
to amenities such
as education, jobs,
grocery, etc in OZ
Longer life
expectancy
higher education
and income levels,
lower poverty
levels, better
health in OZ
All parties are
concerned with
poverty in USA;
Funds will be
dedicated;
suitably educated
staff available
Procedural
agreements
negotiated by
parties; state
leaders comply;
public-industry
support &
interest; training
processes
Parties continue
to collaborate;
States nominate
OZ before
deadlines;
effective
coordination
between
agencies- IRS,
HUD, SEC, EDA, etc;
Investors and
developers trust
and understand
program; Tax
incentives spur
activity in OZ;
Money moves
from other
investments to
real estate.
Development
revitalizes
communities,
increased supply
keeps prices
down, Lower class
benefits from
access to new
resources.
Increased
development and
amenities will
improve health,
educational, and
occupational
outcomes in OZ
33
Inputs Activities Outputs
Intermediate
Outcomes 1
Intermediate
Outcomes 2
Final
Outcomes
TheoryofChange
Contextual
Assumptions
MechanismMapping Logic Model: Opportunity Zones (OZ) of the 2017 Tax Cuts and Jobs Act

34. Location
34
Charlotte
Puerto Rico
Alaska USA
Hawaii

35. Timeline
35
January 1,
2019
first purchase date to qualify as
Opportunity Zone property
final date to receive any step up tax
benefit of OZ (10% step up gone)
Tax due on original deferred gain.
Statutory expiration of designation of
Qualified Opportunity Zones
final date to receive full tax benefit
of OZ (15% step up goes away)
Original deferred gain is recognized
Final date to invest capital gains
from 2026 to earn 10-year exclusion
Final date to dispose of Opportunity
Zone investment
December 31,
2021
April 15, 2027
December 31,
2028
December 31,
2019
December 31,
2026
June 28,
2027
December 31,
2047

36. Time Frame
36
180 Days After Sale of Former Asset Deadline to reinvest gain for QOF benefits
5 years after QOF Acquisition 10% basis increase on deferred gain
7 years after QOF Acquisition 5% basis increase on deferred gain
December 31, 2019 Last day of total tax benefit eligibility
December 31, 2021 Last day to receive 10% basis increase
December 31, 2026 Last day to reinvest in QOF
Sale of QOF 10 years after acquisition Basis stepped up to fair market value of QOF
December 31, 2028 Qualified Opportunity Zones expire

37. Measuring Opportunity Zone SuccessCost & Benefits
✘ Benefits of OZ
○ Tax deferral on capital gains until 12/31/26
○ Step-up basis of value of invested capital gains
○ After 10 years basis increases to 100% of fair market value.
✘ Cost of OZ
○ Real loss of 1.6 billion over 10 years
37
1. Joint Committee on Taxation, “Estimated Budget Effects of the Conference Agreement for H.R. 1, The ‘Tax Cuts and Jobs Act.’” 6
2. Eastman, Scott. “Measuring Opportunity Zone Success.” Tax Foundation, June 27, 2019. https://taxfoundation.org/measuring-opportunity-zone-success/.
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
OZ Cost in Billions -1.2 -1.7 -1.6 -1.7 -1.6 -1.5 -1.5 -1.6 8.1 2.7