Why a Government Investigation of Opportunity Zone Funds Won’t Faze Investors

The Treasury Department has reportedly opened an investigation into opportunity zones, or tax incentives encouraging investment in low-income areas.  

Following the passage of the Tax Cuts & Jobs Act, which included those tax provisions, a wave of opportunity zone funds targeting institutional investors popped up. An investigation could potentially affect how those funds invest. 

But one former attorney for the House Oversight and Government Reform — who is now an opportunity zone advisor — said opportunity zone investors aren't panicking.  

“Investors are ignoring it,” said Steve Glickman, the owner and chief executive officer of Develop LLC, by phone Thursday. 

The New York Times and NBC reported Wednesday that the investigation has been opened, roughly two and half months after three Congressmen requested it. A spokesperson for the Treasury Department did not return a phone call and an email seeking confirmation on Thursday. 

Opportunity zones have come under fire because some are concerned that while they purport to encourage investment in low-income areas, the way those zones have been set up can actually enrich already well-to-do areas. A map from the policy and advocacy organization Economic Innovation Group shows that opportunity zones exist in Manhattan’s Hell's Kitchen neighborhood and Los Angeles’ Hollywood neighborhood, among others. 

In October 2019, Sen. Cory Booker, Rep. Emanuel Cleaver II, and Rep. Ron Kind asked the department to investigate the implementation of the program “following multiple reports of possible wrongdoing by senior administration officials” and asked department and White House officials to turn over all relevant communication about the program.  

“The underlying legislation, the Investing in Opportunity Act, was intended to support the growth and revitalization of our nation’s most economically underserved communities,” their request said. “It was not the intent of Congress for this tax incentive to be used to enrich political supporters or personal friends of senior administration officials, as recent reports indicate.” 

According to Glickman, the investigation is par for the course.  

“It’s pro forma for agencies to open investigations when they receive requests from Congress,” Glickman said by phone Thursday. “I don’t expect this investigation to lead to much of anything that should concern investors.” 

Glickman said he would be “surprised” if the agency found wrongdoing. He added that the Treasury Department’s mandate in the opportunity zone program is narrow: they merely had to identify the census tracts used to determine where opportunity zones are located. Governors of each state, though, could pick any 25 percent of those tracts they wanted to qualify for the program, he added.  

[II Deep Dive: Is Anyone Actually Investing in Opportunity Zone Funds?] 

In other words, it is unlikely that the Treasury Department’s actions were outside the bounds of the law, he said.  

“It would be possible that they decide a few zones were chosen in violation of rules,” Glickman said. “Even in that case, you’re only talking about one or two census tracts out of nearly 9,000 around the country.” 

Spokespeople for Booker, Cleaver, and Kind did not return phone calls or emails seeking comment Thursday.