The Michigan State Housing Development Authority (MSHDA) recently announced that Governor Rick Snyder has submitted Michigan’s application for Opportunity Zones to the federal government.

Opportunity Zones, created through the recent tax reform legislation, are designed to incentivize investments in low-income communities or areas directly adjacent to one or more low-income communities.

These communities include census tracts where the poverty rate is at least 20 percent or neighboring areas where the income is less than 125 percent of any bordering low-income tract. MSHDA shares that under the guidelines all nominated tracts “should have opportunities for potential investment.”

The governor is recommending 288 census tracts, (which is the maximum number of tracts that qualify in Michigan), to be designated as official Opportunity Zones.

Michigan is now waiting on approval from the federal government for the 288 census tracts.

Once approved, investments made in these areas allow investors to reinvest capital gains taxes in an Opportunity Fund, “which are forgiven in 10 years if the project isn’t sold,” reports Bridge Magazine.

Mission Investors Exchange shares, “The greatest tax benefits would go to investors who invest for 10 or more years. In this way, Opportunity Funds may activate passive, patient capital by connecting investors to projects in low-income communities. The pooled fund model may also increase the scale of investments while lessening the risk to any individual investor.”

"I think this tax incentive has the potential to encourage more traditional investors to explore investing in communities in need,” Jennifer Oertel, CMF’s Impact Investing Expert-In-Residence said. “The data shows that impact investing funds often meet or exceed investors' expectations for both financial and social return. I just hope that the program is designed so that the dollars will flow to many different themes of social impact in order to catalyze real change."

Detroit Mayor Mike Duggan told MLive that this program will make it “much more attractive to invest” in low-income communities.

Bridge Magazine reported on equity concerns emerging about some of the areas recommended for Opportunity Zones in Michigan, such as some high-poverty areas being left off the list. You can view the recommended Opportunity Zone areas in Michigan.

In response, Brian Mills, COO of MSHDA told Bridge Magazine that “states can only nominate one in four of all impoverished areas, so it chose neighborhoods where development is likely to occur.”

MSHDA says the state may expect to receive feedback from the U.S. Department of Treasury and further guidance on Opportunity Zones as early as the end of next month.