Government Accountability Office Weighs in on Qualified Opportunity Zones

Government Accountability Office Weighs in on Qualified Opportunity Zones

Posted by on Jan 30, 2021


Oversight and reporting concerns have been part of the Opportunity Zones program since it came into effect as part of the Tax Cuts and Jobs Act of 2017. The Brookings Institution’s 2018 report, “Learning from Opportunity Zones: How to Improve Place-Based Policies” decried the lack of “necessary data and defining criteria” when it came to targeting distressed communities under the program. In late 2019, Sen. Ron Wyden (D-OR) sponsored S.2787, the “Opportunity Zone Reporting and Reform Act.” The legislation focuses on Qualified Opportunity Fund (QOF) requirements, as well as modifications to the Qualified Opportunity Zones (QOZs). The bill was referred to the Senate finance committee, where it remains.

More recently, the U.S. Government Accountability Office added its own findings and concerns about the lack of QOZ oversight. To that end, the government’s watchdog organization released the “Opportunity Zones: Improved Oversight Needed to Evaluate Tax Expenditure Performance.” The report’s main gist is that the lack of specific data collection and performance indicators could hamper policymakers’ ability to evaluate the program’s effectiveness, or compare it to similar programs. 

Specifically, the GAO report indicated the following:

  • The QOZ program “generally has fewer limits on the project times that can be financed,” compared to other community development tax spending programs. 
  • The QOZ program has fewer controls in place to limit revenue loss.
  • Unlike the New Markets Tax Credit program (which also targets lower-income community resurgence), the Opportunity Zone program isn’t subject to limits on aggregate dollar amounts that can be claimed.
  • In creating the Opportunity Zone program, Congress didn’t designate an agency with the authority to collect data on, or to evaluate, QOZ performance. As a result, “there are insufficient data available to evaluate OZ performance,” the GAO report noted.

Along with introducing the problems inherent with the program, the GAO’s report provided the following recommendations.

First, that Congress should consider providing the U.S. Department of the Treasury with authority and responsibility of collecting data, and reporting on QOZ tax spending, in collaboration with other agencies. The GAO had previously indicated that the Treasury department would be the appropriate agency to “evaluate tax expenditures that do not have logical connections to program agencies.” 

Second, that Congress should consider creating questions, directed to the Treasury Department, about QOZ tax expenditures. The GAO indicated that such questions could be helpful when it comes to streamlining and guiding data collection and performance reporting.

Specifically, the GAO was interested in putting into place a system that would summarize the data types (and collection processes) that could evaluate QOZ performance as well as determine future congressional efforts and decisions about the Opportunity Zone program.

Senator Wyden weighed in on the report’s conclusions, indicating that “The GAO report again reiterates the complete lack of oversight of the Opportunity Zone program, particularly as compared to other incentive programs.” 

The GAO has sent the report to the “appropriate congressional committees,” as well as to the Treasury and U.S. Department of Housing and Urban Development secretaries. Also on the receipt list are the Commissioner of Internal Revenue and Director of the Community Development and Financial Institutions Fund.

For additional information about the Opportunity Zone program and its investments, Realized Holdings by logging on to, or calling 877.797.1031.

There are material risks associated with investing in QOZ properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal.

Past performance is not a guarantee of future results. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation.

This is not a solicitation or an offer to sell any securities. There is no guarantee that the investment objectives of any particular program will be achieved.

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