Bipartisan Push for OZ Extension Deadline and Regulation


In April of 2022, a bipartisan bill was introduced to the House and Senate under the name, “The Opportunity Zones Transparency, Extension, and Improvement Act” from representatives Cory Booker, Tim Scott, Mark Warner, Todd Young, and Chris Van Hollen and Representatives Ron Kind (D-WI-03), Mike Kelly (R-PA-16), Terri Sewell (D-AL-07), Jackie Walorski (R-IN-02), and Dan Kildee (D-MI-05). Within this legislation, massive changes are discussed, including an extension of the Opportunity Zone deadline. 

The first change on the docket involves sunsetting Opportunity Zones that are at or above the national median family income (NMFI) by a margin of 130%. Not only would this remove the Opportunity Zone status of these tracts, it would then provide the state the ability to add an additional OZ in a different location. This does not mean that currently developed projects will lose their OZ status and benefits, it means that no new OZ investments may be added to a tract after it is sunset. The 130% MFI cutoff seems to be the interesting part, in that it is leveling all OZs to the same living standard. These standards of living are easily viewable by purchasing power by states. Someone living in an OZ within New York will likely have less purchasing power daily than someone living in an OZ within Texas.

Secondly, there would be a reinstatement of reporting requirements from the Investing in Opportunity Act (IIOA), the original legislation that created Opportunity Zones. The ethos behind this reinstatement is to ensure long-term stability within the program by monitoring the efficacy of development tracts. The deadline for OZ benefits will also change from 2026 to 2028 to make up for a lack of deployable assets during the Covid-19 pandemic.
Third, which is the newest innovation for OZs, this legislation would allow Qualified Opportunity Funds (QOFs) to invest directly into other QOFs. This would come in the form of creating a Qualified Feeder Fund (QFF) in which 95% of its assets are deployed into other QOFs. This would function similarly to a Venture Capital fund but exclusively in QOF projects. QFFs allow entities to deploy smaller investments in a broad range of projects, thus broadening the capacity for capital gains to be put to use in underserved and underdeveloped areas.

The final inclusion within this legislation is the “State and Community Dynamism Fund” (SCDF). The SCDF establishes a $1 billion pool to be distributed across states in an effort to spur specific QOFs and development projects. The projects of choice have not been disclosed but appear to be up to discussion if the legislation is passed.