The federal opportunity zone program (26 U.S.C. §1400Z et seq., the OZ Program) provides tax benefits to encourage private investment in economically distressed areas. More than 8,700 census tracts, located in every state, Washington, D.C. and five U.S. territories, were designated as opportunity zones. Proponents hoped that investments in these communities would spur economic development and job creation in needy communities. Many states and localities, including New York City and New York state, aligned their tax codes with the incentives provided under the OZ Program.
However, critics have noted that some projects have failed to generate the social benefits promised by the OZ Program. Legislators in New York have removed some of the benefits of the OZ Program for residents of New York and some non-residents with gains from New York property. This article gives a brief overview of the benefits provided through the OZ Program and how these benefits were incorporated into New York’s tax code, and then describes how new legislation will strip some of these benefits for purposes of New York state and New York City taxes, while retaining others.
