Trump tax breaks for low-income neighborhoods draw scrutiny

DposNews - November 20, 2019 - puck

A section in President TrumpDonald John TrumpDem senator says Zelensky was ‘feeling the pressure’ to probe Bidens 2020 Dems slam Trump decision on West Bank settlements Trump calls latest impeachment hearings ‘a great day for Republicans’ MORE’s tax law aimed at revitalizing economically distressed communities is receiving increased scrutiny from lawmakers.

The GOP tax law, enacted in late 2017, created the “opportunity zones” program, which provides capital gains tax breaks to those who make investments in certain low-income census tracts.

There is broad bipartisan support for the objectives behind opportunity zones and interest from lawmakers on both sides of the aisle in providing more transparency via reporting requirements about the investments made.

But Democrats are pushing for more substantive changes to the program and have become increasingly concerned about opportunity zones in recent weeks, following news reports highlighting how wealthy developers are influencing and benefiting from the program.

“Reporting is not sufficient to ensure that tax revenue is forfeited only if the intended public purpose is fulfilled,” a group of Democratic lawmakers in the Congressional Black Caucus wrote in a letter Monday. Signers of the letter include House Majority Whip James Clyburn (D-S.C.) and Sens. Cory BookerCory Anthony BookerKrystal Ball issues warning to Biden supporters Sanders official predicts health care, climate change will be top issues in fifth Democratic debate 2020 Democrats seek investigation into ‘toxic culture’ at NBC ahead of debate MORE (D-N.J.) and Kamala HarrisKamala Devi HarrisKamala Harris endorses Christy Smith in bid to fill Katie Hill’s seat Poll: Biden holds 11-point lead over Warren in Arizona Poll: Biden and Warren are neck and neck in California MORE (D-Calif.), who are both running for president.

The opportunity zone portion of the GOP tax law provides several different types of capital gains tax breaks to investors in the zones. The program was based on bipartisan legislation that had been introduced by Sen. Tim ScottTimothy (Tim) Eugene ScottOn The Money: Appeals court clears way for Congress to seek Trump financial records | Fed chief urges Congress to boost US workforce | Federal deficit hits 4 billion in one month | China talks hit snag over agricultural purchases GOP senator blasts Dem bills on ‘opportunity zones’ Lindsey Graham basks in the impeachment spotlight MORE (R-S.C.) and Booker.

Investors who realized capital gains and then rolled over the gains into “opportunity funds” investing in the zones can temporarily defer taxes on those existing gains. If investors hold their previously earned capital gains in opportunity funds for at least 5 years, they pay less in taxes on the investments. And if investors hold investments in opportunity funds for at least 10 years, they don’t have to pay any capital gains taxes on new gains produced by those investments.

The opportunity zone provision is one of the portions of the tax law that Trump likes to highlight. In a speech last week at the Economic Club of New York, Trump called opportunity zones “one of the biggest successes that you’ve ever seen.”

But the program, which is still in its early stages, is drawing concerns from Democrats that it lacks enough rules, amid stories highlighting specific zones and projects that critics think are problematic.

Some articles and think-tank studies have drawn attention to specific areas designated as opportunity zones, including areas included in zones because they are adjacent to low-income census tracts, areas that are already gentrifying and areas that are in college towns that aren’t disadvantaged but appear to be low income because much of their populations are students. There have also been several reports about areas being designated as opportunity zones after developers lobbied government officials.

One specific zone that has drawn criticism is in Storey County, Nevada. The New York Times reported last month that Treasury Secretary Steven MnuchinSteven Terner MnuchinNegative interest rates are uncalled for in today’s strong economy House passes stopgap as spending talks stall On The Money: Supreme Court temporarily blocks House subpoena of Trump financial records | Trump touts ‘cordial’ meeting with Fed chief | Stopgap funding measure includes census money, military pay raise MORE instructed the department to designate the area as a zone — after it had been previously determined to be ineligible — after spending time with former “junk bond king” Michael Milken, who co-owns a company that holds land in the area. Treasury said that Mnuchin was unaware of Milken’s investments in Storey County and that the decision to reexamine the zone came at the request of Nevada politicians.

There have also been reports that focus on specific investments being made in opportunity zones that critics say aren’t benefiting low-income residents of the areas, such as investments in luxury apartment buildings.

A Treasury department spokesperson said opportunity zones “were defined by Congress as low-income areas in accordance with census data, and chosen by state and local leaders.” The spokesperson noted that census tracts that are in opportunity zones because they are adjacent to low-income areas also were subject to income restrictions and argued that critics of the program are cherry-picking and vilifying specific projects.

Democrats in Congress have taken a number of actions in recent weeks to increase oversight and impose more guardrails over the program.

Some of their efforts have focused specifically on the Storey County zone. House Ways and Means Committee Chairman Richard NealRichard Edmund NealOn The Money: House passes monthlong stopgap | Broader spending talks stall | Judge orders Democrats to give notice if they request Trump’s NY tax returns | Progressives ramp up attacks on private equity Overnight Energy: Mark Ruffalo pushes Congress on ‘forever chemicals’ | Lawmakers spar over actor’s testimony | House Dems unveil renewable energy tax plan | Funding for conservation program passes Senate hurdle House Democrats release renewable energy tax proposal MORE (D-Mass.) and Senate Finance Committee ranking member Ron WydenRonald (Ron) Lee WydenOvernight Health Care: GOP senator says drug price action unlikely this year | House panel weighs ban on flavored e-cigs | New York sues Juul Top GOP senator: Drug pricing action unlikely before end of year Senate aides met with tax return whistleblower: report MORE (D-Ore.) sent a letter to Mnuchin earlier this month seeking information about how the decision was made to designate Storey County.

Neal, Wyden, Rep. John LewisJohn LewisDemocrats ramp up oversight efforts over ‘opportunity zone’ incentive The 13 House Democrats who back Kavanaugh’s impeachment Detroit police chief calls Tlaib facial recognization idea ‘racist’ MORE (D-Ga.) and Booker have also asked the Government Accountability Office to issue a report on the census tracts designated as opportunity zones and Treasury’s implementation of the program, while Booker and Reps. Emanuel Cleaver (D-Mo.) and Ron KindRonald (Ron) James KindAlcohol industry races to save tax break by year-end deadline Democrats ramp up oversight efforts over ‘opportunity zone’ incentive Treasury, IRS propose form to collect data about investments in opportunity zones MORE (D-Wis.) have asked the Treasury inspector general to review its implementation.

Wyden has also introduced legislation that would terminate zones that are not low-income and specify that investments for certain types of projects, such as sports stadiums and luxury apartments, don’t qualify for the tax incentives. Similar legislation has been introduced in the House by Clyburn.

More Democratic efforts could be on the way.

A spokeswoman for Neal said that the Ways and Means Committee could hold a hearing on opportunity zones in the future.

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Rep. Alexandria Ocasio-CortezAlexandria Ocasio-CortezSanders doubles down on Bolivia ‘coup,’ few follow suit Hillicon Valley: Progressives oppose funding bill over surveillance authority | Senators call for 5G security coordinator | Facebook gets questions over location tracking | Louisiana hit by ransomware attack Overnight Energy: Mark Ruffalo pushes Congress on ‘forever chemicals’ | Lawmakers spar over actor’s testimony | House Dems unveil renewable energy tax plan | Funding for conservation program passes Senate hurdle MORE (D-N.Y.), a prominent progressive, said that she’s been talking to other lawmakers about opportunity zone legislation.

“I don’t have it right on the docket right now, but it’s definitely an area of policy that I think we need to address,” she told reporters Friday. She expressed concerns that “opportunity zones aren’t satisfying the actual intent behind which they were created.”

There is interest from Republicans in making some improvements to the opportunity zones programs as well.

Bipartisan legislation has been introduced in the House and Senate to boost reporting requirements. Stand-alone bills on opportunity zones that predated the 2017 tax law had reporting requirements, but those requirements were not included in the GOP tax law because of the budget rules used to pass the bill in the Senate with only a simple-majority vote.

The Treasury Department and IRS late last month released a draft form to collect information about the amount of investments that opportunity funds are making by census tract.

Republicans have continued to praise opportunity zones and are critical of legislation like those from Wyden and Clyburn.

Scott blasted the legislation in a statement last week, saying that it would “needlessly punish low-income communities who are hoping to use Opportunity Zones to transform areas left behind.” He argued that legislation would terminate some zones with significant poverty rates and that only a small percentage of zones are in gentrifying areas.

A White House spokesperson said that since Treasury is still working on final rules to implement opportunity zones, “it’s premature to make drastic changes to legislation that so far has created amazing results.” The spokesperson pointed to planned opportunity zone investments in affordable housing, technology startups and rural health centers.

But Democrats are keeping up their pressure.

Rep. Wm. Lacy ClayWilliam (Lacy) Lacy ClayMaloney wins vote for Oversight chairwoman GOP senator blasts Dem bills on ‘opportunity zones’ ‘Squad’ members recruit Raskin to run for Oversight gavel MORE (D-Mo.), a co-sponsor of Clyburn’s bill, said Scott should be more open to changes like those in his legislation.

“I don’t want opportunity zone tax [breaks] used for a soccer stadium. I think that was not the original intent of Mr. Scott,” Clay told reporters Friday.