Of the many efforts the US federal government has made to create a more equitable space for people of color, opportunity zones have emerged as a popular method for both Democrats and Republicans. Opportunity zones were created through the Tax Cuts and Jobs Act of December 22, 2017, with the purpose of spurring economic development in distressed communities. Qualified opportunity zones (QOZ) are defined as economically disadvantaged communities where investments deemed to be helpful to the community become eligible for preferential tax treatment. These communities must be nominated by a state, the District of Columbia, or a US territory and then approved by the Secretary of the US Treasury in order to receive these benefits. Then, investors file an 8896 Form through the Internal Revenue Service to create a Qualified Opportunity Fund (QOF). Investors either designate the QOF as a partnership or a corporation and the fund is required to hold at least 90 percent of its assets in that qualifying opportunity zone area. Investors can save money by investing in opportunity zones in two ways. Investors can defer tax on any amount that is then “timely invested” into the QOF until that QOF is sold or exchanged. However, if the investment is held for at least 5 years, investors get a 10 percent exclusion of the deferred gain. The amount of eligible gain an investor can defer is contingent on the extent to which the QOF exceeds its initial fair market value. In the case that investors hold their investments in the QOF for a minimum of 10 years, they become eligible to adjust their QOF investment to its fair market value. This adjustment then allows for any appreciation in a QOF investment to be exempt from taxation. 

In the summer of 2018, the Treasury Department designated 8,766 census tracts nominated by governors and the Mayor of the District of Columbia as opportunity zones. 31.5 million Americans live in designated opportunity zones with 57 percent being people of color, compared to 39 percent of minority groups in the country as a whole. Residents of opportunity zones face a multitude of issues ranging from rent burden to food deserts. Moreover, the areas have a combined poverty rate almost twice the national average. 

Qualified opportunity zones have served as a major policy to draw in more support from black voters for the Trump administration. They received support from both sides of the political aisle with notable backing from Senator Tim Scott, a Republican from South Carolina, and Senator Cory Booker, a Democrat from New Jersey. The White House Council of Economic Advisors (CEA) delivered a progress report from August of 2020, which stated that opportunity zones have generated half a million jobs, attracted $75 billion in capital investments, and are on track to reducing the poverty rate in opportunity zones by 11 percent. This would lift 1 million people out of poverty. During his tenure, Former President Donald Trump also issued Executive Order 12072, which prioritized opportunity zones as federal site locations. Opportunity zones have seen significant levels of success with QOZs being more likely to host commercial and business activity than non-opportunity zones. 

However, when questioned about the specificities about the billion-dollar investments, the Trump White House presented no evidence of the investment breakdowns. Results from the opportunity zone programs have been mixed. Home sales data from 2,760 zones revealed that some zones have seen an unintended increase in property value in low-income neighborhoods. Moreover, the tax breaks for wealthy investors have grown from $2.2 billion a year to $3.5 billion. Democrats and Republicans acknowledge that opportunity zones are beneficial to the invigoration of low-income neighborhoods overall. But politicians on the left are demanding more oversight and accountability from investors to improve communities in exchange for the generous tax breaks. In the fall of 2019, the Treasury Department acknowledged the call for more oversight but ultimately rejected the recommendations.  

President Biden’s policies regarding investment in low-income areas retain many of the same practices as Trump’s Qualified Opportunity Zones. Biden plans to devote $30 billion in innovation funding to the Small Business Opportunity Fund, in addition to expanding the New Markets Tax Credit (NMTC) to $5 billion annually. The NMTC Program also falls under the US Department of Treasury and uses federal tax credits to incentivize investment in low-income communities. However, the NMTC program requires annual Congressional appropriation of tax credit authority and applies tax credits to investors who apply and pass a competitive annual award process. Opportunity zones are preferable for investors because there is no need for Congressional approval or allocation of limited tax credits, but NMTC oversight allows for an assessment of community welfare. 

Opportunity zones cater toward the interests of both investors and members of low-income communities. Those with wealth are investing in low-income places with the expectation that they will get a return. QOZs also benefit entrepreneurs who want to open businesses and develop real estate but who cannot afford to by providing financial support to ease the burden of taxation. However, the lack of accountability also creates the potential for investors to misuse QOFs. Other programs such as the NMTC avoid this potential by requiring investors to document and report how their investments promote job creation, access to goods and services to low-income residents, and other community benefits. Without such oversight, opportunity zones can serve as catalysts for potentially harmful practices such as gentrification and community displacement, hurting the communities they were intended to serve. In addition to allocating resources towards the NMTC Program, President Biden has called for reforming opportunity zones to better serve minority communities, small businesses, and homeowners. As the legislation stands currently, QOZs “as a whole [are] not living up to its economic and community development goals.” Biden proposed incentivizing opportunity funds to partner with nonprofit or community-oriented organizations to jointly produce a community benefits plan for each investment with a focus on creating jobs for low-income residents. Biden also proposed directing opportunity zone benefits to be reviewed by the Department of Treasury to ensure that these tax benefits are only available to those who demonstrate clear economic, social, and environmental benefits. There have also been plans for more transparency by requiring recipients of opportunity zone tax breaks to provide detailed reporting and public disclosure on their opportunity zone investments and the impact on local residents, including poverty status, housing affordability, and job creation.