Election seasons, especially one like the election Americans just experienced, tend to create angst and concern about economic policy, public spending and the overall future of economic vitality. Public officials want to know if their critical projects will move forward under new leadership. Companies that sell, invest or transact any kind of business in the government marketplace react negatively to uncertainty. People, in general, are concerned about change, and radical change is especially unsettling.
However, a federal announcement this week provides positive economic news as plans are being made for 2027. It gives public officials, companies and investors a concrete framework for pursuing development opportunities as newly elected leaders prepare to take office.
On Nov. 5, the U.S. Department of the Treasury and the Internal Revenue Service announced 6,576 new Qualified Opportunity Zone designations across all 50 states, U.S. territories and the District of Columbia. That is important for many reasons, but primarily because it creates the potential for new investment and contracting opportunities.
The new Opportunity Zone designations take effect January 1 and will remain in place for 10 years. The tax incentives are designed to attract private investment to designated census tracts in economically distressed communities.
For public officials seeking development and companies looking for future contracting opportunities, there are reasons to begin examining locations, partnerships and infrastructure needs now. The program’s permanent authorization and 10-year zone designations provide a longer planning horizon for qualifying investments in real estate and operating businesses.
Opportunity Zones provide tax incentives for eligible investments made through Qualified Opportunity Funds. These investment vehicles can support qualifying real estate projects and operating businesses within designated areas. The Department of the Treasury reports that the incentives have generated more than $110 billion in private-sector investment since the program began. The program, through the tax incentives, should significantly boost economic vitality throughout America.
The program does not provide local governments with new federal grant money. Instead, it encourages investors to commit private capital to qualifying projects in exchange for attractive tax benefits.
The revised framework also introduces a rolling five-year deferral for eligible invested capital gains and stronger incentives for qualifying rural investments. Investors who meet the requirements and hold qualifying investments for at least 10 years may also exclude qualifying appreciation from taxable income.
Early indications suggest that investors are preparing for the next phase. An Oct. 29 report from OpportunityZones.com summarized a survey that included investors, developers, fund managers, financial advisers and other industry professionals. Fifty-nine percent said they were likely or very likely to make an Opportunity Zone investment in 2027. January through March was the most commonly selected timeframe for their next investments.
These findings reflect genuine interest among surveyed industry participants, not just a forecast of nationwide investment. The data provides another reason for public officials and potential private-sector partners to begin identifying viable projects and addressing infrastructure needs now.
For companies that partner with government, the practical message is to get started now. Review the designated locations, understand local priorities and identify the infrastructure needed to support viable development. January is approaching quickly, and the most useful conversations can begin before any new investment is made.
Finally, companies will wonder where the most and quickest new opportunities will surface. California has 620 newly designated census tracts, followed by Texas with 608, New York with 430 and Florida with 342. Ohio, Illinois, Georgia, Pennsylvania, Michigan and North Carolina round out the 10 states with the most designations. Louisiana has 156 designated tracts and Mississippi has 102. Zone counts alone, however, cannot determine which jurisdictions will move the quickest. Companies should therefore consider both the concentration of designated zones and the readiness of individual communities.
Elections come and go, but economic development remains a foundation of sustainability for a region, state or nation. Whatever political leadership is in place, the critical needs for jobs, water, power, and other reliable infrastructure will remain.
