The Treasury Department’s deputy inspector has opened an investigation into the Opportunity Zone program. Let’s take a look.
What is the Opportunity Zone Program?
Before we dive into the Opportunity Zone investigation, let’s quickly recap the program.
As part of the 2017 tax overhaul, lawmakers added a tax deferment option known as the Opportunity Zone program. Conceived as a win-win proposition, the initiative aimed to both:
- Funnel money into under-served communities with the goal of revitalization; and
- Provide investors with a new way to reduce their tax burdens.
In theory, under-served communities would benefit from new businesses and jobs moving in their neighborhoods. In return, investors could shave dollars off their tax bills through deferment and profit shelter provisions provided for under the program.
Investigation into the Opportunity Zone Program is Underway
But there’s now concern that the program isn’t benefiting the designated zones.
Reports surfaced that wealthy developers are supposedly using government connections to get affluent tracks added to the list of designated neighborhoods. Three lawmakers asked the Treasury Department’s watchdog to open an investigation into the matter.
In their letter, the lawmakers highlight Michael Milken, a high-profile financier, whom they suspect of inappropriately leveraging friendships to game the system. They admonished: “If the Treasury Department provided a stamp of approval as a political favor, it is not only unacceptable, but in complete violation of the congressional intent of the Opportunity Zones.”
The Treasury’s deputy inspector general agreed to look into the concerns and expects to “complete [the investigation] and respond to the congressional requesters in early spring.”
How Will This Affect Current Opportunity Zone Investors?
As of the time of this writing, nothing has changed about the Opportunity Zone program. Regulators recently released clarifying rules that allow more people to participate.
If something changes after the investigation, we will cover it and counsel clients through the amended parameters.
Connect with a Tax Consultant about the Opportunity Zone Program
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