Opportunity Zone Magazine Volume 1, Issue 3 | Page 54

54 OPPORTUNITY ZONE MAGAZINE | VOLUME 1 • ISSUE 3 OPPORTUNITY ZONES AND ECONOMIC IMPACT: A PRACTICAL FUND APPROACH must be performed at the OZ community level. Let’s examine how QOFs can engage at the local level and how progress on local economic impact can be measured and reported by the QOF. LITANY OF GOVERNMENT-INCENTIVE FINANCING TOOLS The first step in establishing guidelines for the OZ program’s success and sustainability is to look at similarly situated government programs and how those initiatives have implemented economic impact. For the last 50 years, the United States has sought to execute government incentive programs to promote development in low-income or distressed communities. These established programs serve as an example of a working partnership between government and the private sector for the purpose of a shared, common goal. These programs also help lay a foundation and framework from which the OZ program can operate. Here, the partnership has the shared goal to change the landscape of forgotten communities through the development of affordable housing, businesses, and aesthetically-appealing buildings to create livable and desirable communities. For example, the Internal Revenue Service (IRS) created the non-competitive 4% and competitive 9% Low Income Housing Tax Credit (LIHTC) program in 1986, which have assisted in creating the largest stock of new affordable housing in the U.S. 8 The IRS allocates these LIHTC awards to investors through certain local government agencies in exchange for providing upfront capital to developers of affordable housing. Currently, there are about 2 million tax credit units and this number continues to grow by an estimated 100,000 annually. 9 Also, the New Markets Tax Credit (NMTC) program, enacted by Congress as part of the Community Renewal Tax Relief Act of 2000, is also administered by the IRS through the U.S. Treasury’s Community Development Financials Institution (CDFI) Fund. 10 NMTC permits individual and corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs) in qualified community development entities (CDEs), which aims to attract private investment necessary to reinvigorate struggling local economies. Around 1979, the federal government revamped the use of the National Historic Preservation Act of 1966 (the “Act”), which created the National Register of Historic Places, through introducing the Historic Tax Credit (HTC). 11 The Act was created in order to help coordinate and support public and private efforts by identifying, evaluating and protecting historic and archeological resources. In essence, old and dilapidated buildings, usually in distressed areas, could now be improved to support changing the face of these communities. OPPORTUNITYZONE.COM