The federal tax bill passed at the end of December 2017 allows the Governor to designate eligible census tracts as Opportunity Zones. Investments made by individuals through special funds in these zones would be allowed to defer or eliminate federal taxes on capital gains. The Governor can designate up to 25 percent of census tracts that either have poverty rates above 20 percent or median family incomes of no more than 80 percent of statewide or metropolitan area family income. There are 3,516 census tracts in 54 California counties that would qualify under one or both of the mandatory criteria, allowing the Governor to designate up to 879 tracts.
Preliminary Recommended Tracts
The Department of Finance and the Governor’s Office of Business and Economic Development (GO-Biz) have released preliminary recommended tracts. The tracts are highlighted in the maps below and were selected using the following criteria:
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Focus on Poverty. Only those tracts that meet the federal poverty criteria were selected to focus efforts on those poorest areas of the state. In addition, within each county, focus was placed on the poorest areas (top 30 percent of eligible tracts).
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Areas with Business Activity. Designating tracts with at least 30 business establishments helps distinguish primarily residential tracts from those that are zoned to encourage more business investment.
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Geographic Diversity. To increase geographic diversity, the preliminary recommendation maintains a minimum of two tracts per county if possible.
These designation criteria identify tracts that significantly overlap with other statewide programs that the Legislature and Governor have previously targeted. For instance, 66 percent of the recommended tracts overlap with tracts identified as disadvantaged in Senate Bill 535 from 2012, and 98 percent overlap with tracts identified as disadvantaged in Assembly Bill 1550 from 2016. (Both of these bills help direct revenues from cap and trade programs.)
Provided below are links to the following resources:
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A Census Bureau address lookup that provides tract numbers.
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A large, non-interactive map (28 inches x 40 inches) of the eligible census tracts for California. Click here to view or print.
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An interactive map displaying eligible tracts and the recommended tracts.
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An excel workbook, OZ Eligibility, contains the 3,516 eligible California census tracts. It also indicates the 798 tracts in the Governor’s recommended option.
Please note that the IRS guidelines for Opportunity Zones have yet to be released, so we have limited knowledge on the nature and intent of future Opportunity Funds and investments, i.e. we do not know if the final guidance will even include affordable housing as an eligible investment.
If you would like to comment directly on the preliminary designated tracts, please visit the CA Opportunity Zones webpage for additional information on how to submit.