(The Center Square) – A program designed to award tax breaks in an effort to drive investment in low-income communities is not catching on in Illinois as it is elsewhere.
Opportunity zones were established under the Tax Cuts and Jobs Act of 2017. The zones work by helping investors reduce the capital gains taxes they owe on previous investments by investing those gains in OZ communities for at least seven years. If investors keep their investment in OZs for ten years, they can eliminate their tax bill entirely.
Illinois has 327 designated opportunity zones located all around the state, the sixth highest number in the country, but Illinois is trailing most of the country in OZ investment.
“A bit of an anomaly in the state of Illinois where about 20% of OZs had registered investments in 2020 compared to 48% nationally,” said Kenan Fikri, the director of research with the Economic Innovation Group during a University of Illinois Extension webinar.
Fikri notes that population loss in Illinois could be a contributing factor to the lack of OZ investment.
“Illinois and most counties in Illinois have a population stagnation or loss issue that they are grappling with,” said Fikri. “That is one factor that we see correlates with OZ interest and demand.”
Certain states have higher levels of income disparity between opportunity zones and their statewide average than others. In places like Illinois and Connecticut, the median household income in opportunity zones is 50% or less than the statewide average.
A University of Illinois tax law and social policy expert believes some communities get left behind in these types of programs.
“Tax incentives to invest in poor areas have never been designed to advance the needs of poor communities, and opportunity zones are just another chapter in a much longer story,” wrote Michelle Layser, professor of law at the U of I, in a 2019 paper.
There are 8,764 opportunity zones in the United States, with the most in California.
