The Opportunity Zone (OZ) program has started to take shape in communities nationwide. And with things getting off the ground for participants in the OZ market, it’s critical that proponents stay on course with the true intent of the policy. But what does economic impact in OZs mean exactly? And how can Qualified Opportunity Funds (QOF) help achieve this desired impact?


Commentators have ascribed a myriad of economic policy goals to the OZ provision of the Tax Cut and Jobs Act of 2017. Since this legislation is tax policy, it is beneficial to follow the policy goals as articulated by the Internal Revenue Service (IRS) in defining the purpose of your practice:

“Opportunity Zones are an economic development tool—that is, they are designed to spur economic development and job creation in distressed communities.” [1]

Importantly, the IRS states both job creation and economic development as distinct goals within the OZ program. Therefore, it is fundamentally important not to conflate the two goals when striving for economic impact [2] in an OZ investment. The two goals are distinct in their ease of measurement. And, as discussed below, the objectives to support the goal of job creation are different than the ones in support of economic development. [3] The priorities given to these objectives vary across OZ communities. [4] In short, the goals of job creation differ from those related to economic development, and should be treated as such.


Job creation is relatively simple to measure. Here, the goal and objective are the same throughout OZ communities. An OZ business or project knows how many employees it has, and the growth in employees is easily tracked over time. Indeed, the IRS could even gauge jobs in OZs through payroll and other required tax filings. Of course, such distinctions as temporary jobs in a real estate development project versus longer-lasting jobs in an operating business matter here; but even these distinctions can be countable. Even the indirect “multiplier effects” associated direct job creation can be quantified. [5]


Economic development is inherently a broader, fuzzier goal compared to job creation. Inspired by Nobel prize economist Amartya Sen, economic development is defined as “the expansion of capacities that contribute to the advancement of society through the realization of individuals’, firms’ and communities’ potential.” [6] In OZ discussions, the specific objectives within the goal of economic development expansion of capabilities to realize the potential include: [7]

• quality of wages

• education levels including workforce training

• career advancement opportunities, including individual equity across racial and gender lines

• surrounding work-life conditions such as connected to transportation, medical services, child-care, grocery stores, affordable housing

• access to capital to start or grow businesses, including minority and women-owned businesses

• wealth creation including to individuals in the OZ communities

• environmental conditions affecting quality of life

Each of these economic development objectives can be measured at least qualitatively, but the measurements are more complex and variable compared to the simple task of “counting heads” as in job creation. For example, opinions may differ on quality wages, affordability, wealth, connected transportation, equity, etc.

All OZ communities share the objective of job creation, but they vary considerably on the priorities assigned to the myriad of objectives under the goal of economic development. These differences are the reason that engagement and measurement must be performed at the OZ community level. Let’s examine how QOFs can engage at the local level and how progress on local economic impact can be measured and reported by the QOF.


The first step in establishing guidelines for the OZ program’s success and sustainability is to look at similarly situated government programs and how those initiatives have implemented economic impact.

For the last 50 years, the United States has sought to execute government incentive programs to promote development in low-income or distressed communities. These established programs serve as an example of a working partnership between government and the private sector for the purpose of a shared, common goal. These programs also help lay a foundation and framework from which the OZ program can operate. Here, the partnership has the shared goal to change the landscape of forgotten communities through the development of affordable housing, businesses, and aesthetically-appealing buildings to create livable and desirable communities.

For example, the Internal Revenue Service (IRS) created the non-competitive 4% and competitive 9% Low Income Housing Tax Credit (LIHTC) program in 1986, which have assisted in creating the largest stock of new affordable housing in the U.S. [8] The IRS allocates these LIHTC awards to investors through certain local government agencies in exchange for providing upfront capital to developers of affordable housing. Currently, there are about 2 million tax credit units and this number continues to grow by an estimated 100,000 annually. [9]

Also, the New Markets Tax Credit (NMTC) program, enacted by Congress as part of the Community Renewal Tax Relief Act of 2000, is also administered by the IRS through the U.S. Treasury’s Community Development Financials Institution (CDFI) Fund. [10] NMTC permits individual and corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs) in qualified community development entities (CDEs), which aims to attract private investment necessary to reinvigorate struggling local economies.

Around 1979, the federal government revamped the use of the National Historic Preservation Act of 1966 (the “Act”), which created the National Register of Historic Places, through introducing the Historic Tax Credit (HTC). [11] The Act was created in order to help coordinate and support public and private efforts by identifying, evaluating and protecting historic and archeological resources. In essence, old and dilapidated buildings, usually in distressed areas, could now be improved to support changing the face of these communities.

In addition, the Housing Urban Development agency (HUD) administers incentive programs to further encourage development in distressed communities. For example, Community Development Block Grants (CDBG) program funds, in part, finances housing development to revitalize neighborhoods, promote economic development and improve community facilities through local government agencies. [12] HUD’s Home Investment Partnerships (HOME) program provides direct financing for developers to build, buy, and/or rehabilitate affordable housing through local government agencies as well. [13]

The tax incentives associated with these programs benefit the private sector, providing economic tools to revamp communities nationwide. As such, the OZ program is evolving this notion further through community engagement,