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.
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