WASHINGTON – The Trump administration issued regulations on Wednesday that could help venture capitalists, Indian tribes and entrepreneurs benefit from a new tax incentive that encourages investment in fighting communities.
Supporters of this incentive, referred to as opportunity zones, had complained to the administration in recent weeks that its regulations could put the bulk of that money into real estate development rather than start-up companies that are more likely to get well-paid jobs create.
The regulations released on Wednesday have been released to alleviate many of these fears. However, critics said the government had not done enough to ensure the program achieved its goals.
"This regulatory round removes some of the most significant barriers that keep capital marginal, especially in terms of operating business," said John Lettieri, president of the Economic Innovation Group, a Washington research organization that developed the Opportunity Zone concept
Senator Tim Scott of South Carolina, the Republican who has included Zones in the tax code, said in a press release that the proposed regulations "would have taken some good steps" to help investors and business owners Last week, Mr. Scott said in an interview that he was "just worried" about the government's regulatory approach.
The tax incentive promises investors the opportunity to postpone, reduce, or – if investment is considered more than enough – to invest In a decade, taxes on certain capital gains will be abolished, sofer n invest in opportunity zones. These areas were determined last year by states on the basis of criteria that included poverty and income levels.
After two regulatory rounds and continued criticism from economists who made proposals to make the program more responsible, the government will still have no system for prosecuting investment in the zones and helping the communities, as announced. Finance ministers said Wednesday they were looking for suggestions on how the department should collect data on opportunity zones.
"This thing has been in effect for 17 months and now you are asked for comments on data collection?" said Olugbenga Ajilore, a senior economist at the liberal Center for American Progress in Washington. "It's frustrating, there must be some accountability to the community."
Even before the government passed its rules, the Zones have become a boon to real estate developers and are criticized by people who say they are Investors were on the rise, accelerating the displacement of low-income residents in emerging areas.
The finance ministers have developed a series of tests in which they began releasing tax exemptions in October An important test by which many local authorities assess the zones is whether the tax credits contribute to job creation, not just condominiums, retail outlets, hotels and other real estate projects, which often do not create many permanent jobs with opportunities for advancement. Mr. Scott and others h It also called on officials to lay down rules to encourage investment in entrepreneurship and to attract a variety of investors, including venture capitalists, who could set up funds to support multiple projects in different zones.
The rules were released Wednesday by a White House meeting on this program attempting to comply with this request in various ways.
They include provisions that allow investors to qualify for the breaks, even if the companies they finance focus on exported goods or services or the domestic market outside the zone. For long-term vacant properties, the tax benefits are immediately qualified. Investors may split their shares of funds investing in the zones and sell a start in an opportunity zone, provided the money is reinvested in another qualifying business or asset. Real estate investors can lease and refinance their real estate.
Mr. Trump announced the regulations and the program and described the zones as "really a crucial part of our new tax law to help low-income Americans."
"As you know," he said in the White House, "gives this important provision." Businesses are an enormous incentive to invest in and create jobs in the most underserved communities in our country. "
Proponents of the zones said the regulations could be further enhanced to encourage even more business investment.
Some critics admitted that the new provisions were important precautions so that more communities could use the zones For example, tax relief might help the Native Americans because they often lease their land to businesses.
The proposal also allows Treasury officials to lift tax relief for each Opportunity Zone project, if that is the case a significant purpose of a transaction is to obtain a tax result that is incompatible with the purposes of the program.