Complaining that Opportunity Zones have been used to reward wealthy investors instead of low-income communities, Democrats in both the House and Senate introduced legislation this week to reform the tax break program.
Questionable Opportunity Zone designations in Nevada have garnered national headlines and sparked criticism from local officials.
“It’s become apparent that the lack of oversight, questionable zone designations, and misguided implementation of this program has led to it becoming, in too many instances, another tax credit for investors instead of benefiting the communities that it was designed to help,” said Democratic U.S. House Majority Leader James Clyburn of South Carolina, the chief House sponsor of the bill.
Companion legislation has been sponsored in the Senate by Democrat Ron Wyden of Oregon.
“The Treasury Department has been steering potentially billions in tax breaks to Donald Trump’s friends,” Wyden said, “and there are no safeguards to ensure taxpayers are not simply subsidizing handouts for billionaires with no benefit to the low-income communities this program was supposed to help.”
Opportunity Zone capital gains tax breaks were created under the major tax legislation that became law in 2017.
Nevada became a poster child for the Trump administration granting favorable Opportunity Zone tax breaks to investors while sidestepping low-income communities, when the Washington Post last year reported former Republican Gov. Brian Sandoval and former Republican Sen. Dean Heller lobbied the Treasury Department to designate the booming Tahoe Reno Industrial Center (TRIC) as an Opportunity Zone. TRIC is home to the Tesla-Panasonic battery factory, Google and Switch data centers, and other high-dollar investments.
Last month, the New York Times reported one-time junk bond king Michael Milken, who has an interest in several hundred acres within TRIC, may have been even more instrumental than Sandoval and Heller in getting Treasury to render TRIC investors eligible for lucrative tax cuts afforded by an Opportunity Zone designation.
Clark County Commissioners Justin Jones and Lawrence Weekly have also criticized the program’s designation of the Las Vegas Raiders football stadium and the surrounding area as an Opportunity Zone, while low-income communities in Southern Nevada were neglected.
“Lack of transparency, questionable zone designations, sloppy drafting, and a lax interpretation of rules by the Treasury Department have enabled abuse of Opportunity Zones,” reads a fact sheet on the bill prepared by Wyden’s office.
The legislation would end Opportunity Zone designation for areas that are not low-income, require additional reporting and more transparency from investors who claim Opportunity Zones tax breaks, tighten designation rules so as to assure the program focuses on low-income communities, and require review of the program’s effectiveness by the General Accounting Office.
The legislation would also prohibit Opportunity Zone designation for luxury apartments, parking lots, self storage, and stadiums.
Both the House and Senate versions of the bill were introduced Nov. 12. Clyburn’s House bill thus far has four co-sponsors, and Wyden’s in the Senate has two.
None of the co-sponsors of either version are from Nevada.