Pascrell Leads Ways and Means Colleagues Seeking Treasury Action on Opportunity Zones

Nine committee Democrats propose ways to help improve transparency and effectiveness of scrutinized program

WASHINGTON, DC – U.S. Rep. Bill Pascrell, Jr. (D-NJ-09), the Chairman of the House Ways and Means Subcommittee on Oversight, led his colleagues asking the U.S. Treasury Secretary to take action, as well as provide answers, on ways to improve and strengthen the opportunity zones program enacted into law to benefit disadvantaged communities.

On November 16, 2021, the Subcommittee held a hearing on opportunity zones and highlighted steps Treasury can take to make the program more equitable, transparent, and beneficial to the communities most in need. The members’ letter today to Secretary Janet Yellen follows up on that hearing.

“We also would like to learn what actions Treasury has taken, or plans to take, with respect to this program, consistent with views the President has expressed on the program. With just over 10% of the U.S. population living in a designated opportunity zone…it is essential that we prioritize accountability and results to the communities that this program was intended to help,” the members write Treasury.

The opportunity zones program was created as part of the GOP tax scam law of 2017 to “spur economic development and job creation in distressed communities” throughout the United States. But the program has come under fire for potentially pervasive abuse by wealthy Americans. Responding to an October 2019 report that the program was being influenced by a disgraced financier associate of then U.S. Treasury Secretary Steve Mnuchin, Pascrell demanded answers on possible abuses.

The letter is signed by Reps. Pascrell, Danny Davis (D-IL-07), Judy Chu (D-CA-27), Gwen Moore (D-WI-04), Dan Kildee (D-MI-05), Dwight Evans (D-PA-03), Tom Suozzi (D-NY-03), Jimmy Gomez (D-CA-34), and Stacey Plaskett (D-VI).

The text of the members’ letter is below.

December 20, 2021

The Honorable Janet Yellen

Secretary

Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, DC 20220

Dear Secretary Yellen,

On November 16, 2021, the House Ways and Means Subcommittee on Oversight (Subcommittee) held a hearing on “The Opportunity Zone Program and Who It Left Behind.” The hearing highlighted steps that the Department of the Treasury (Treasury) could take to evaluate the program and determine how to make it more equitable, transparent, and beneficial to the communities most in need. We write today to get your input on these recommendations and to learn what steps Treasury is taking with respect to the program.

As you know, while the program was created to benefit communities facing economic distress, the structure of the program has resulted in some of the most vulnerable communities being left behind.^[1] Further, the lack of reporting requirements makes it difficult, if not impossible, for Treasury, Congress, and the public to determine whether the program is achieving its intended goals. Reporting requirements were in the original legislation but were removed from the Tax Cuts and Jobs Act in the reconciliation process. Notably, the witnesses supported additional reporting requirements for opportunity zones at the Subcommittee’s recent hearing. This proposal also enjoys broad bipartisan support in Congress.

Based on the Subcommittee’s hearing, we have identified three steps the Administration could take to improve the program under existing law.^[2] First, the Administration could implement a rigorous certification process for Opportunity Funds, including a measurement of community benefit from opportunity zone investments, as well as increased disclosure and reporting requirements to further engage residents throughout the approval process. A possible model for this approach is the New Markets Tax Credit program. Second, Treasury could allocate dedicated agency staff (beyond the Internal Revenue Service) to conduct proper oversight of the program. This staff would have administrative authority over the program and would be able to collect and share data regarding public investments. Third, Treasury could require transaction reporting, separate from tax forms. Treasury has the authority to make transaction information mandatory and could make aggregate-level data public for transparency.

We urge Treasury to promulgate rules promptly with these or similar requirements. We also would like to learn what actions Treasury has taken, or plans to take, with respect to this program, consistent with views the President has expressed on the program. With just over 10% of the U.S. population living in a designated opportunity zone and designated tracts having lower incomes, higher poverty, higher unemployment, and greater non-white populations compared to other eligible census tracts,^[3] it is essential that we prioritize accountability and results to the communities that this program was intended to help.

As always, your assistance is appreciated. Thank you, in advance, for your prompt attention to this matter.

Sincerely,

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[1]  Patrick Kennedy and Harrison Wheeler, Neighborhood-Level Investment from the U.S. Opportunity Zone Program: Early Evidence (Apr. 12, 2021), https://static1.squarespace.com/static/57a3c0fcd482e9189b09e101/t/607893b915858d7bd0d198ba/1618514881004/oz_kennedy_wheeler.pdf.

[2]  See Written Testimony of Brett Theodos, Senior Fellow, Urban Institute for House Ways and Means Subcommittee on Oversight Hearing: The Opportunity Zone Program and Who it Left Behind (Nov. 16, 2021), https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/B.%20Theodos%20Testimony.pdf.

[3]  Government Accountability Office, No. 22-104019, Opportunity Zones: Census Tract Designations, Investment Activities, and IRS Challenges Ensuring Taxpayer Compliance (Oct. 2021), https://www.gao.gov/assets/gao-22-104019.pdf.