NEW STATUS: A map showing areas on the West Side that have been designated as Opportunity Zones. | Illinois DCEO

Much of the West Side is now a federally designated Opportunity Zone, which makes new investment created in the area eligible for preferential capital gains tax treatment.

The zones, created through the Federal Tax Cuts and Jobs Act of 2017, are designed to “spur economic development and job creation in distressed communities,” according to the IRS.

Illinois Gov. Bruce Rauner announced on May 18 that 327 census tracts across 85 counties in the state had been officially designated by the U.S. Treasury Department as Opportunity Zones.

Governors across the country had until March 21 to submit to the U.S. Treasury Department a list of communities they had selected to nominate to become Opportunity Zones in their states.

The volume of nominations was limited to 25 percent of the total amount of low-income communities within the states. 

According to the IRS, Opportunity Zones give a range of tax benefits to investors who put their money in a Qualified Opportunity Fund — a vehicle designed for investing in Opportunity Zones.

“First, investors can defer tax on any prior gains until the earlier of the date on which an investment is sold or exchanged, or December 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund,” the IRS explains.

“Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor would be eligible for an increase in basis equal to the fair market value of the investment on the date that the investment is sold or exchanged.”

In his May 18 announcement, Gov. Rauner said that the creation of the new Opportunity Zones “is a really exciting opportunity for communities throughout Illinois,” adding that the zones “include some of the most underserved areas of the state that have the greatest potential for improvement.”

Rauner also noted that the zones “present an opportunity for private, tax-free investment in low-income areas with economic need, benefiting residents living in the zones and private investors.”

In a statement released in April, U.S. Treasury Secretary Steven T. Mnuchin said that he was “very excited about the prospects for Opportunity Zones.

“Attracting needed private investment into these low-income communities will lead to their economic revitalization, and ensure economic growth is experienced throughout the nation,” he said.

But some economic experts aren’t entirely sold on Opportunity Zones.

Adam Looney, an economic studies senior fellow at the Urban-Brookings Tax Policy Center, a nonpartisan but progressive-leaning Washington, D.C. think tank, doesn’t buy into the hype.

Looney, writing in a February article, pointed out Opportunity Zones present the “risk that instead of helping residents of poor neighborhoods, the tax break will end up displacing them or simply provide benefits to developers investing in already-gentrifying areas.”

Before arguing that the evidence that place-based policies like Opportunity Zones tax breaks is “inconclusive,” Looney wrote that the place-based policy with the “best proven record” are Empowerment Zones, which “focused on people and local services not just capital investments.”

And Megan Schrader, a columnist for The Denver Post, wrote in December that “the provision included in the GOP tax bill, known as ‘qualified opportunity zones,’ will open up yet another loophole in the U.S. tax code ripe for abuse by tax avoiders and evaders who have no intent to comply with the spirit of the law.”

Schrader argued that, despite their worthy intentions, the Opportunity Zones appeared to be another tax “loophole” that will allow “financial institutions setting up qualified opportunity funds to market to their wealthy clients near retirement as a safe place to park their money tax-deferred in a slow-growing market for 10 years. The trade-off being slower growth than the stock market but tax-free gains.”