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When Opportunity Zones (OZs) were first announced, there was a substantial amount of interest and enthusiasm. The effort included key members of Congress and a significant number of high-profile venture investors. The OZs were going to motivate new investment in over 9,000 census tracks across the country that had historically been socioeconomically disadvantaged and overlooked. 

And then depression set in. Not economic depression, but the kind of brain-hurt that occurs when regulators, accountants, and lawyers get together to define the process and enabling regulations. 

I personally helped chair or facilitate numerous educational meetings to try to unwind how OZs would work and how the benefits would be realized. Most of us would have had an easier time showing up at CERN in Switzerland on any given day and explaining dark matter and quantum entanglement.

Here’s the bottom line: OZs, as they stand today, are really only a play for real estate transactions. In addition, because the OZs only allow for a shielding of capital gains, they limit investment participation to wealthy investors. Guess what? Most of these investors don’t live or work anywhere near the OZs. Would you care for a double shot of gentrification in your latte?

With that rant off my chest what can be done?

For OZs to really have the intended impact, expand the tax benefit to include a dollar-for-dollar federal tax offset to ordinary income coupled with an elimination of the SEC accredited investor rules. By simplifying the rules overall and making these specific changes, investors across the economic spectrum that actually live in and around the OZs would be able to participate and invest in operating businesses and real estate. This change would strengthen the commitment to the local businesses and new starts in OZs in dramatic ways and would allow participation by the very people the OZs were intended to help in the first place.

To be clear OZs, were put in place with the very best of intentions. Now it is time to fix OZs so that they actually work for everyone. Speak up and let’s get this done! If you want to learn more check out the Arkansas Entrepreneurial Policy Map.