OZs Not Monitored Closely Enough, Government Accountability Office Says

The opportunity zone program, which counts more than 8,700 census tracts as participating zones, is essentially flying in the dark, according to a new report by the Government Accountability Office.

The data currently collected on the program, mostly by the Internal Revenue Service to do its job, isn't enough to assess whether the OZs are creating jobs, as is the intention of the law, the report says.

The GAO provides investigative and auditing services for Congress as it relates to budget matters and federal expenditures, and is independent of the executive branch, though its head is appointed by the president.

"As a result of unclear statutory authority, there are insufficient data available to evaluate OZ performance," the report says. "Without additional data ... only limited reporting on performance is possible. Additional data collection and reporting on OZ are necessary to evaluate outcomes. It would be beneficial for Congress to indicate what questions it would like such evaluations to address, such as what are OZ’s effects on employment and housing in the Zones."

Tax expenditures like the zones are part of the Internal Revenue Code and are administered by the IRS. But the IRS’ administration of the tax code doesn't typically extend to evaluations of performance, including outcomes, the report notes, and it has no plans to begin them.

Having the U.S. Treasury Department collect OZ data is one possibility, the GAO says, but to make that happen Treasury officials say they would need appropriations and specific direction from Congress. The department does that kind of data collection and interpretation for other programs, such as the New Market Tax Credit.

Treasury officials also told the GAO that they don't have the legal authority to redirect the Community Development Financial Institutions Fund’s appropriations to have it collect OZ data, similar to the types of NMTC data it collects.

At the root of the difficulty, it says, is the fact that the 2017 tax cut bill that created the opportunity zone program didn't specify an agency within the federal government to collect or evaluate data on OZs. Nor is there any requirement to report findings about the program to Congress.

That has been a long-standing sore point about the program. U.S. senators and representatives from both sides of the aisle want OZ funds to start reporting data on the number of jobs created in the zones, and for the U.S Treasury to provide data on the program’s other impacts. 

Develop CEO Steve Glickman, a former Obama administration official and an architect of the program, told Bisnow that those legislative reforms would be “low-hanging fruit,” and easy wins for sponsors, including U.S. Sen. Tim Scott, a Republican from South Carolina, and U.S. Rep. Ron Kind, a Democrat from Wisconsin.