Hello everyone,
A lot has been written about Opportunity Zones, a federal tax break that is designed to move investments into lower-income areas.
Delaware has a number of Opportunity Zones that include Newark, thanks to a special designation for college towns. The thinking is that college towns are a favorable environment for start-ups. Newark can point to Gore and Rodel (now DuPont) as examples of what can happen.
Interestingly enough, the former GM Boxwood Assembly site near Newport does not qualify, due to higher incomes in area around the site. Downtown Wilmington also has an area that did not make the cut.
These curious omissions have led to claims that political pressures played a role in designating the zones.
A recent story from Bloomberg notes that Delaware is benefitting indirectly from the zones, thanks to the its status as an incorporation hub.
It turns out that companies, like Tyson Foods, are forming entities as part of the process needed to obtain the Opportunity Zone break. That bolsters corporate fees, a key source of revenue in Delaware.
A little keyword filtering from Bloomberg found 1,800 Delaware corporate entities had names that seemed to be tied to Opportunity Zones. Others could be lurking in the filings, since names do not have to reflect a corporate purpose.
After all, federal taxing matters are pretty much confidential, making efforts to assess the impact of the zones more difficult, minus some assessment from Uncle Sam.
There is also the issue of whether Opportunity Zones make things worse for the working poor and lower middle class.
Critics claim the tax tool will be used to build luxury housing in areas such as Philadelphia that are already gentrifying. That accelerates the process of the poor moving elsewhere.
The example mentioned in the Bloomberg piece is a new Texas feed mill that would serve a chicken processing plant. In addition to seeking the Opportunity Zone status, Tyson is getting an abatement on county taxes in a county that clearly deserves the Opportunity Zone designation.
Critics want to see more transparency as a way to determine the overall impact of Opportunity Zones.
We do know the Opportunity Zone designation comes with a degree of complexity that will keep financial wizards busy. The big guys enter the game with built in advantages.
To its credit, the State of Delaware and others are working to educate and assist investors who might benefit from Opportunity Zones.
It is clear that we do need to have some way to evaluate Opportunity Zones and see if the tax breaks are moving in the intended direction.
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