In 2019, Wyden introduced legislation that would increase reporting requirements for opportunity zone investors and curtail the kinds of projects that would qualify for tax breaks under the program. The legislation would also remove areas that were originally designated as opportunity zones that weren’t actually poor, including well-off areas of Detroit and Baltimore that ProPublica reported on that year.
The chair of the Senate Finance Committee is demanding information from several billionaire developers to determine whether they are abusing a Trump tax break that was supposed to benefit poor communities.
Citing ProPublica’s reporting on the program, Sen. Ron Wyden, D-Ore., sent letters today to Jorge Perez of Related Group, Kushner Companies and several other developers asking for details on how they are taking advantage of what’s known as the opportunity zone program.
The program, created in President Donald Trump’s 2017 tax overhaul, provides a series of tax breaks for making investments in swaths of specially designated land around the country. The program’s bipartisan advocates contended the program would funnel money into disadvantaged neighborhoods that were otherwise starved for investment.
Under the program, investors receive tax advantages. Chief among them is that any gains on projects in the zones are tax-free after a number of years.
But ProPublica and other news outlets found that investments often went to develop projects that benefit the affluent. In a series of stories in 2019, ProPublica reported that developers around the country had successfully lobbied to get favored tracts included in the opportunity zone program, at the expense of poorer areas. Several of those tracts were in well-off areas or were sites of long-planned projects that predated the tax break, suggesting that public subsidies could flow to projects that were going to happen regardless.
Now Wyden is scrutinizing the tax benefit. “I have long been concerned that the Opportunity Zone program may permit wealthy investors another opportunity to avoid billions of dollars in taxes without meaningfully benefitting the distressed communities the program was intended to help,” Wyden wrote in the letter.
Wyden’s letter zeroed in on one of the projects highlighted by ProPublica: an opportunity zone in West Palm Beach, Florida, that contains a superyacht marina owned by a major Republican political donor.
“It appears that the Opportunity Zone program is already helping subsidize luxury real estate development by wealthy developers, and in many cases will allow these investors to realize the gains on their investments completely tax-free,” Wyden wrote. “Among the investments that have reportedly qualified for these generous tax breaks, are projects that include luxury apartment buildings and hotels, high-end office towers, self-storage facilities and a ‘superyacht marina.’”
In his letter to Perez, head of a company developing the luxury condo project in the West Palm Beach zone, Wyden requested information on when the project was conceived; details of any lobbying of public officials on the opportunity zone issue; and numbers on job creation and tax benefits associated with the project.
Asked for a response back in 2019, the West Palm Beach developers said they were not motivated to seek the tax break for their own benefit and hoped to spur additional economic development for the surrounding area.
Wyden’s letters are designed to fill in details about how the program is unfolding. While some have called for its outright abolition, even supporters of the opportunity zone program have decried the lack of any reporting requirements that might allow experts to measure whether the tax breaks are achieving their stated goals.