Why Investors Need to Watch OZ Bills

If you’re involved with Opportunity Zones, you need to be aware of two bills that have been introduced on Capitol Hill. The bills were proposed after recent news questioned who benefits from the Opportunity Zone program.

The Senate Opportunity Zone Reporting and Reform Act, introduced last week by Ron Wyden (D-OR) would address concerns about Opportunity Zone investments being made in areas that are not in poverty.

Currently, states can designate low-income areas as Opportunity Zones. In addition, an area adjacent to a low-income area can also receive the Opportunity Zone designation.

Wyden’s bill would sunset continuous Opportunity Zone designations for areas that are not low income and areas where the median family income is more than 120 percent of U.S. family median income. A contiguous area where median family income is more than 120 percent could remain an Opportunity Zone if 20 percent of the population is at or above the poverty rate above and less than 10 percent of the population is enrolled in an institution of higher education. The bill would give states the chance to designate replacement zones.

Additionally, Wyden’s bill would require public information reporting by all Qualified Opportunity Funds and annual reporting by investors in Opportunity Funds; clarify rules governing Opportunity Zone investments in an effort to ensure investments are actually helping the community; and require program review by the Government Accountability Office (GAO).

Jimmy Flores, co-founder and CEO of Qualytics, which provides Opportunity Zone strategies, calls Wyden’s bill “political,” though he says some of the original Opportunity Zone tracts may have grown more expensive with gentrification.

“Some of those zones are in higher income areas and I guess that you could make an argument for redesignating those,” Flores says.

The bill in the House, the Opportunity Zone Accountability and Transparency Act, was introduced last week by Reps. Ron Kind (D-WI), Mike Kelly (R-PA), and Terri Sewell (D-AL). The legislation, which is not a companion to the Wyden bill, would focus on reporting and disclosure requirements for Qualified Opportunity Funds (QOFs).

“We expected this type of bill,” Flores says. “This is just purely for administrative purposes. It gets funds to report more information on their projects and what their fund is encompassing. It just gives that information to the government.”

Flores says the information from these reports would show how many investors were in a fund or if the fund was actually allocating money to the projects that it was supposed to. “It is also probably the government’s way of trying to measure what your projects are, where they are, what funds are moving into them and how much money you are spending per project,” he says.

Flores doesn’t see the Senate bill passing, but could see a bill that increases transparency, as the House bill does, becoming law. Either way, this legislation highlights that those involved in Opportunity Zones need to be focused on Capitol Hill.

“For investors, you’re going to want to do your due diligence and make sure that you’re a little bit more involved than just writing a check,” he says.