Opportunity Zones: Potential Economic and Community Impacts in Durham and Johnston Counties, North Carolina

Abstract

The 2017 Federal Tax Cuts and Jobs Act included a provision for creating "Opportunity Zones" to spur investment in disadvantaged communities. The Act provided that funds invested in these zones (plus an additional amount of "new money") will enable investors to postpone taxes on capital gains from other investments, and also reduce their tax rate if the investment is kept for more than ten years. What is the possible economic and social impact of these Opportunity Zones both nationally and in North Carolina? This paper reviews hundreds of investment funds and projects that have been created to channel private capital into Opportunity Zones. It then looks at zones in Durham County (7 zones) and in Johnston County, North Carolina (4 zones). In Johnston County the opportunity tracts will likely attract investors seeking market-rate returns, result in more temporary economic impact and little to no social impact. In Durham County the opportunity tracts will likely attract investors seeking equitable development and have the potential to achieve longer term social impacts. It will be important to consider how the Opportunity Zone program interacts with other government subsidies (e.g., New Market Tax Credits) available to investors.