WTF: Opportunity zones

Buncombe County opportunity zones map
LAND OF OPPORTUNITY? State-designated opportunity zones span five Asheville-based census tracts. Investments in these areas can earn federal tax benefits through the 2017 Tax Cuts and Jobs Act. Graphic courtesy of the N.C. Department of Commerce

Increase investments. Create new businesses and jobs. Inject much-needed energy and resources into low-income areas.

Those are the stated goals of the “opportunity zones” program, a federal initiative established during the administration of former President Donald Trump. The zones offer tax breaks to investors who put money to work in areas designated as economically depressed — including parts of every Western North Carolina county.

Opportunity zones are now playing a role in some of WNC’s highest-profile development projects, including the controversial Bluffs at River Bend in Woodfin. The latest edition of Xpress’ WTF feature — short for “Want the Facts?” — takes a deeper look into the significance and consequences of the program.

What is an opportunity zone?

Created by the Tax Cuts and Jobs Act of 2017, opportunity zones are specifically designated census tracts in which investors can receive special tax considerations. Over 8,700 opportunity zones were selected across all 50 states, according to the IRS, “to spur economic growth and job creation in low-income communities while providing tax benefits to investors.”

How were opportunity zones selected?

Opportunity zones must consist of low-income census tracts or those where “the poverty rate is 20% or greater and/or family income is less than 80% of the area’s median income,” according to the N.C. Department of Commerce. Over 1,000 such tracts qualified in North Carolina, but federal legislation limited each state to choose 25% of its tracts as opportunity zones.

In choosing North Carolina’s tracts, the state Department of Commerce “analyzed census data, public input, direct outreach and collaboration with local officials” to finalize 252 opportunity zones. (Responding to an Xpress request for comment, Buncombe Board of Commissioners Chair Brownie Newman said, “I don’t recall local government having a role to play in the decision making.”)

Where are WNC’s opportunity zones?

Buncombe County contains the most opportunity zones in WNC with five census tracts, all in the greater Asheville area. Those zones include the Oakley, Southside, East End and Emma communities.

All other WNC counties host at least one zone. Rutherford County has three designated tracts, while McDowell County has two.

How can investors participate?

To engage with the program, accredited investors, or those deemed qualified to invest in “complex or sophisticated securities,” must invest in opportunity zone projects through “qualified opportunity funds,” corporations or partnerships whose purpose is to invest in opportunity zones. Those funds must hold at least 90% of their assets in opportunity zone property.

Funds must make “substantial improvements” to their investment properties, defined as “equal to the original value paid by the fund,” within a 30-month period to qualify for tax benefits. Certain businesses, such as golf courses, country clubs, racetracks, other gambling facilities and liquor stores, are excluded from opportunity zone projects.

Nathan Ramsey, executive director of the Land of Sky Regional Council in Asheville, says opportunity zone investors stand to benefit in three ways:

  • Defer taxes for capital gains (the profit from selling an asset for more than its purchase price).
  • Reduce the amount of tax paid on deferred gains if they hold an investment for at least five years.
  • Exclude appreciation from the taxable value of investments when selling if they hold an investment for at least 10 years.

The program is structured to encourage long-term investments, Ramsey explains, with the elimination of tax on appreciation value generally the greatest benefit.

What’s resulted from opportunity zones?

Federal guidelines do not require detailed reporting on opportunity zones. It’s thus difficult to measure their impact with hard data, both nationally and at the local level.

As of 2020, according to The Pew Charitable Trusts, over $10 billion had been raised by opportunity funds. Although lawmakers on both sides of the aisle had cited job creation as a reason to establish opportunity zones, 97% of that money was expected to support commercial or residential real estate, with much of it going toward hotels and high-end apartments. A 2020 report generated by the Urban Institute concluded that community-focused projects such as affordable housing developments are rare in opportunity zones, with many struggling to find investors.

Ramsey wonders if the tax breaks only sweetened deals that were already underway before the program was established. “The intent of opportunity zones is good, as it’s trying to increase investment in underrepresented communities  I think the question is whether [opportunity zones] increase new investment or whether these projects would have happened anyway,” he says.

Who is benefiting?

Because investment in opportunity zones is restricted to accredited investors — already wealthy individuals, banks, insurance companies and other established players in the financial system — the low-income residents and businesses that are actually located in the zones often don’t have the resources to take advantage of their tax breaks.

Dee Williams is president and CEO of Dee Williams Co. and Eagles’ Wings Development Corp., an Asheville-based nonprofit focused on supporting economic growth for Black residents. Williams says she was strongly in favor of opportunity zones when they were first proposed, but that the program hasn’t yet had its intended impact.

“We were not ready to play. We were not ready to afford ourselves of the opportunity. We don’t have the necessary players in place to jump out front and do it,” Williams says of local Black and low-income entrepreneurs accessing opportunity zones. She adds that the legislation “probably has” accelerated gentrification in low-income communities as outside investors took advantage of the program.

Looking ahead, education around the zones will be key to reaching a more diverse pool of investors. While Ramsey says Land of Sky, in conjunction with A-B Tech, has conducted workshops to spread the word, Williams says more messaging remains to be done.

“Most people don’t even know what they are,” Williams said. “Our local businesspeople end up sitting on the outside looking in. I hope those of us that know about these zones, that know about the benefits and have the knowledge, start going to work.”


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3 thoughts on “WTF: Opportunity zones

  1. Robert McGee

    The proposed Bluffs property should have never been placed into an Opportunity Zone. Richmond Hill is neither blighted nor depressed. But it surely will become both if this project proceeds without a bridge first, as the developer has been attempting to do. If Woodfin wants this project for the short-sighted tax dollars, they must accept and demand the bridge first. It’s also shameful that Asheville City Council did not stand up to protect Asheville taxpayers from this extractive proposal–especially after developer Holdsworth called the Woodfin board a ‘bunch of scumbags’ and showed exactly what kind of community partner he would be. I can suggest a great many other ideas for that property that would better serve and benefit the community for decades to come, rather than screwing up two parks, a forest, a community, and an ancient river.

  2. kw

    This is one of the worst things that vile Trump pushed through for his buddies. But I’m perplexed by Brownie Newman’s statement. Why is there no local oversight and opportunity for public input? How might we work together to right some wrongs? Can Opportunity Zones be overturned?

  3. MV

    Very strange that so much of the Op Zone land is so close to the river. Do none of our local leaders wish to protect the French Broad? We’re witnessing a massive public rape in slow-motion.

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