Paul L. Caron
Dean




Wednesday, September 8, 2021

Nonprofit Participation In Tax-Driven Urban Development Projects

Michelle Layser (Illinois; Google Scholar), Nonprofit Participation in Tax-Driven Urban Development Projects, 48 Fordham Urb. L.J. ___ (2021):

When tax incentives are designed in ways that create opportunities for nonprofits to participate in investments, a wide variety of mission-driven investments can be supported. This Essay has analyzes nonprofit participation in the New Markets Tax Credit program in order to gain insights to the barriers to nonprofit participation in Opportunity Zones investment. It has identified several barriers, including the requirement that Opportunity Funds make equity investments, the absence of monetization structures, and uncertainty about how the investments will be treated under the Community Reinvestment Act. Together, these barriers make it more difficult for nonprofits to participate in Opportunity Zone deals.

Conclusion
When tax incentives are designed in ways that create opportunities for nonprofits to participate in investments, a wide variety of mission-driven investments can be supported. This Essay has analyzed nonprofit participation in NMTC in order to gain insights to the barriers to nonprofit participation in Opportunity Zones investment. It has identified several barriers, including the requirement that Opportunity Funds make equity investments, the absence of monetization structures, and uncertainty about how the investments will be treated under the CRA. Together, these barriers make it more difficult for nonprofits to participate in Opportunity Zone deals.

This is not to say that nonprofits never participate in Opportunity Zone deals or that Opportunity Funds are never mission driven. To the contrary, philanthropies and other nonprofits do participate in Opportunity Zones deals, and some Opportunity Fund investors are highly committed to mission-driven investment. Nevertheless, this Essay has demonstrated that the design of the tax incentive makes it more difficult for nonprofits to participate in Opportunity Zones deals than in NMTC deals, despite similarities between the two incentives. For this reason, it is likely that the mix of investments subsidized through the Opportunity Zones law will include fewer mission-driven projects than what could be promoted under an alternate tax incentive design.

https://taxprof.typepad.com/taxprof_blog/2021/09/nonprofit-participation-in-tax-driven-urban-development-projects.html

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