Q: What are Opportunity Zones?
A: The new federal tax law enacted in December did much more than cut federal income taxes for hard-working Americans. It also includes incentives to attract private investment in low-income areas of the country designated as Opportunity Zones by the U.S. Department of Treasury. As former chairman and current senior member on the tax-writing Senate Finance Committee, I have worked to secure tax policies to help spur entrepreneurship, competition and innovation. Access to affordable capital is a vital key to success for start-ups, farming operations and business expansion. Unleashing private capital into lower-income communities will help drive economic growth and job creation in areas struggling to prosper, from small towns dotting Iowa’s rural landscape to urban centers anchoring our metropolitan corridors. According to Federal Reserve data, it is estimated more than $6 trillion in untapped capital gains wealth is available for investment. Tapping into this stockpile with a tax-advantaged vehicle will attract a much-needed pipeline of investment for cash-strapped areas. The Opportunity Zones offer investors a tax benefit to put their capital to good use and increase their investment along the way. These designated zones give flexibility to state and local government to identify the specific needs of individual communities. Opportunity Zones will give struggling areas a needed financial boost to sow seeds of prosperity and restore vitality to their neighborhoods by filling in their missing pieces of the puzzle. That missing piece may be crumbling infrastructure, affordable housing, workforce development or commercial real estate. Opportunity Zones will offer these communities a fresh start to attract economic development and entrepreneurship that create jobs. By delivering the capital that start-ups need to open up shop, survive and thrive, these designated neighborhoods have an opportunity to make good things happen.
Q: Are Iowa communities eligible to receive designation as an Opportunity Zone?
A: Yes. The Opportunity Zones are administered at the federal level by the U.S. Treasury Department. However, the success of this economic development program rests squarely on the shoulders of local decision-makers, where the rubber meets the road. It deliberately puts state and local government in the driver’s seat to identify needs and implement the program once the Treasury Department certifies an area for this designation. To be eligible, the zones must be located in low-income areas, specifically, U.S. Census tracts where the poverty rate is 20 percent or greater and/or family income is less than 80 percent of the area’s median income. Each state is allowed to designate up to one-fourth of eligible areas as Opportunity Zones. Iowa has 247 areas ranked as low-income community census tracts. Earlier this year, 108 localities across Iowa submitted applications to the Iowa Economic Development Authority. Iowa Governor Kim Reynolds announced in April that 62 of these advanced for final review and consideration to the U.S. Treasury Department. As a taxpayer watchdog, I will be keeping close tabs on the program to make sure it works as Congress intended and is accountable to taxpayers. Leveraging private dollars to equip disadvantaged areas with financial resources to grow and prosper unleashes the power of free enterprise to lift families out of poverty. Used wisely, these dollars will provide the catalyst for economic vitality in disadvantaged neighborhoods. Once certified, these Opportunity Zones will keep their designation for ten years. Like Iowa farmers who sow seeds into the soil each spring, it takes vision, hard work and a leap of faith to turn opportunity into prosperity. I applaud the cities, counties and communities across Iowa who are making the effort to make Iowa an even better place to call home. See the list of Iowa communities nominated for consideration here.