Want To Weigh In On The Next Opportunity Zone Maps? You May Be Too Late

The second iteration of the opportunity zone program, which offers tax breaks for developments in certain census tracts, will be set in stone by the end of the year.

Governors are now preparing to submit their proposed maps for which cities, towns and neighborhoods will benefit from the program to the Treasury Department by a Sept. 28 deadline, giving the agency time to review the nominations before the new iteration of the program takes effect in January.

To inform their nominations, many states began soliciting proposals from the public before the window opened July 1. More than half have already completed that process. 

Twenty-eight states and Puerto Rico have closed their public input process as of July 16, according to data compiled by FBT Gibbons attorney Frances Kern Mennone. Eight states still had public input portals active as of July 16. 

Just like the first iteration of the program that was passed into law in 2017, states are driving this process by designating which census tracts can become opportunity zones. The program allows developers that build real estate projects — and businesses that expand — to receive tax incentives for investing in underserved areas.

But the OZ 2.0 iteration passed into law with last summer’s One Big Beautiful Bill Act narrows the map of eligible tracts and reduces the number of opportunity zones from 8,764 to an estimated 6,544. 

The changes were an attempt by lawmakers to steer investment to lower-income areas and rural communities, which receive added tax benefits under OZ 2.0.

While the law is written to benefit those areas, in practice, the uneven state-by-state rollout may disadvantage smaller communities that don't have the staff to devote to proposing their census tracts as opportunity zones. Kern Mennone said it falls on state leaders to make sure rural areas are participating. 

“I see the designation process as an education process, both for the state staff that's doing it but also for the state itself to get out to the communities and say, ‘Hey, we're doing this designation process. Here's what opportunity zones are all about,’” Kern Mennone said.

“Some states are taking advantage of the opportunity to educate the rural parts of the country on that, and some states are missing the boat.”

The 28 states that have closed their nomination processes are Alaska, Arizona, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Kansas, Kentucky, Louisiana, Maine, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Washington, West Virginia and Wisconsin, along with Puerto Rico.

The eight states that had active portals as of July 16 are Alabama, Arkansas, California, Hawaii, Indiana, Maryland, Massachusetts and Michigan.

The remaining states and territories haven’t announced a public process for soliciting feedback for the opportunity zone maps.

“When this process started, most states had websites that hadn't been updated on opportunity zones since the last time they went through this,” Kern Mennone said.

Arizona became the first state to formally submit nominations to the Treasury on July 7. The state nominated 125 census tracts, including three tracts that don't fit the Treasury's requirements. States can nominate zones that don't fit federal requirements as long as they can prove the tracts can meet certain standards of economic distress.

Vermont released a draft list of 25 designated tracts on July 15 that it is looking to nominate.

Other states have published early data on what tracts could be nominated, such as Ohio, which said it received 951 public nominations, and West Virginia, which received 92. 

Not all of these portals have been completely open to the public, with some of them only open to government entities to submit nominations.

Florida, Ohio and Wisconsin had open portals in which anyone could nominate census tracts to be an opportunity zone, including developers, community groups and residents, according to Kern Mennone's data.

California's portal only allows city and county governments to submit nominations, and they have a deadline of July 25. Maryland's input process only allows counties to submit, and they have a deadline of Aug. 7

Fifteen states and territories have yet to publicize any information about where they are in the process, including New York, which has the largest pool of eligible tracts.

“States can be as public as they want and open as they want about the process, but at the end of the day, they can take all the feedback and not pay any attention to it,” Kern Mennone said. “It could just be window dressing that they're asking everyone for all this information, and then they're just gonna do whatever they want to do.”

OZ 1.0 was a whirlwind for states as they were thrown into a designation process in 2018 for a new program they didn't fully understand, and they were given less time to nominate zones, Kern Mennone said.

“I likened it to a little bit like throwing confetti in the air and watching it fall,” she said. “We didn't really know what the program was all about, and then we turned around and said to the governor's offices, ‘Go figure it out.’”

She said she doesn't believe the outcomes of OZ 1.0 should dictate the process of picking tracts under the new program and that governors should look at this process with a fresh set of eyes.

Over the last several years, many government officials who worked on the original maps have left, and Kern Mennone said it's now time to start educating both the public and government employees about what's at stake.

“This designation process is an opportunity to get it right and relearn all the variables and benefits associated with opportunity zones to take advantage of them,” she said.

Kern Mennone said big cities have the benefit of larger staff and capital to put toward nominating zones, whereas in rural parts of the country, those resources aren't available.

Roughly $112B in investment poured into more than 6,000 opportunity zones through the end of 2024, according to a June Treasury report. More than three-fourths of qualified opportunity zones received investment.

Of that investment, rural zones received significantly less capital, with an average investment of $7.3M, compared to $23.3M in urban tracts.

OZ 2.0 has more of an emphasis on rural opportunity zones, with the Treasury cutting down the area median income from 80% to 70% and giving more tax incentives to development in rural zones than urban.

“It takes time to permeate the rest of the country,” Kern Mennone said. “In rural America, they are washing dishes and then driving firetrucks and are also the city manager. You're expecting them to understand what opportunity zones are on the fly?”