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Included in the 2017 federal tax overhaul was a substantial tax break for investments in businesses and properties located in economically distressed areas. Although state governors had a hand in selecting the nearly 9,000 “opportunity zones” eligible for the incentive, the federal law gave states little say over what types of projects investors actually put their money into.
But lawmakers in at least 17 states have considered measures this year dealing with opportunity zones, including those aimed at steering investors toward certain projects, according to Novogradac & Company, an accounting firm that is tracking such legislation. For instance, California Gov. Gavin Newsom (D) has proposed a state tax break for investments in green technology and affordable housing. And Washington state Rep. Mike Chapman (D) has introduced a bill (H 1324) offering a tax credit for opportunity zone investments in rural areas.
“Through the added incentives, states can encourage the type of development they want to see in opportunity zones,” said Michael Novogradac, managing partner of Novogradac & Co.
However, Novogradac noted that cities and counties may have greater influence than states over what ultimately gets built in opportunity zones. For instance, Boulder, Colorado’s city council stopped some development in its opportunity zone last year, saying more planning was needed.
“I do think [states] can bend the curve to be sure,” Novogradac said. “But at the end of the day it really depends on local government and local policies.” (STATELINE.ORG, LEXISNEXIS STATE NET)