Dinsmore Associate Sierra Williams Shares Insight on Opportunity Zones with Other Economic Development Tax Incentives

Dinsmore taxation associate Sierra Williams wrote an article for the American Bar Association's Journal of Affordable Housing titled "Power Couples: Twinning Opportunity Zones with Other Economic Tax Incentives." An excerpt is below.

Since this country’s inception, federal economic development programs have been fundamental and innovative tools to incentivize both public and private sector investment in distressed areas. In particular, economic development programs offer the prospect of maximized profits (or the prospect of some profit in the case of less-profitable/riskier investments) for wealthy and entity investors, as most allow tax credits that reduce the current-year tax base dollar-for-dollar, tax deferral (resulting in less current-year tax owed), or additional sources of funding.

Each economic development program is implemented for different reasons, using unique methodologies to target different segments of the market. For example, the Low-Income Housing Tax Credit program was adopted as a means to tackle the affordable housing crisis, while the Energy Tax Credit program was adopted to incentivize companies to shift to renewable green energy. Meanwhile, within the Opportunity Zones Incentive (OZ Incentive)1 —the newest economic development innovation found within the Tax Cuts and Jobs Act (TCJA)2 —the federal government has established a broader program that incentivizes place-based economic development, allowing investments in a far wider range of businesses, property, and joint ventures than other programs in years past. This less restrictive structure of the OZ Incentive provides overlap with many other programs’ market coverage, giving investors a unique opportunity to engage innovative tax planning techniques: entering into complex ventures to take advantage of the benefits of more than one program. I refer to this coupling process as “twinning.”

Read the full article here.