12 OPPORTUNITY ZONE MAGAZINE | VOLUME 2 • ISSUE 1
the needed flexibility and time to accomplish their long-term objectives .
PLACED-BASED NATURE OF THE INCENTIVE
The OZ incentive is targeted to particular population census tracts rather than certain industries . It is a broad incentive that can be used for most businesses where the location requirement is satisfied .
The locations for QOZs are based upon economic criteria and the specific QOZs were chosen by each of the states . A population census tract was eligible to be nominated to be a QOZ if the population census tract had ( 1 ) a poverty rate of at least 20 %, or ( 2 ) a median income below 80 % of that in the state or metropolitan area , or 80 % of that in the entire state , in the case of rural areas . A small number of eligible tracts included tracts that were contiguous to a tract meeting the requirements set forth above and where the median income of such tract was less 125 % of the qualifying contiguous tract . There are 229 QOZs that meet this contiguous category . There are approximately 8,766 QOZs across all 50 states , six territories , and the District of Columbia . QOZs represent approximately 11 percent of all population census tracts . The placed-based nature of this incentive allows the subsidy to target projects and operating businesses located in areas that are distressed and in need of jobs and private
The placed-based nature of this incentive allows the subsidy to target projects and operating businesses located in areas that are distressed and in need of jobs and private capital .
capital . Economic Innovation Group ( EIG ) found that the 8,766 QOZs had an average poverty rate that was more than double that of the entire United States . 4 EIG also found that close to onethird of prime age adults in the average QOZ were not working as compared to 22 % across the entire United States . 5 It should be noted that there have been a few articles that have been critical of the OZ incentive by discussing certain QOZs which appear not to need any incentive for private capital investment . Senate Bill 2787 , introduced by Senator Wyden , on Nov . 6 , 2019 , was released in response to such articles , proposes to sunset the status of most of these tracts and allow the states to replace these QOZs with tracts meeting the economic data set forth above . Senate Bill 2787 or something similar has a greater chance of passing now that the composition of the U . S . Senate has changed .
The OZ incentive has the ability to solve certain place-based problems . For example , EIG determined that QOZs ( which represent 11 % of all tracts ) account for more than 28 % of the nation ’ s food deserts ( i . e ., low-income population census tracts without a fullservice grocery store within a one-mile radius in urban areas and within a 10- mile radius in rural areas ). 6 The New Markets Tax Credit ( NMTCs ), another placed-based incentive , has been used for the financing of full-service grocery stores in these food deserts . The OZ Incentive can also be paired with the NMTC ( thereby also resulting in a direct subsidy for the operating business ) or it can be used as standalone incentive for this same purpose .
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