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New York Senators Vote to End Opportunity Zone Tax Breaks in Their State

New York senators have passed a bill seeking to end the use of the Opportunity Zone tax break in their state. The legislation would allow federal tax breaks to stay in place but eliminate NY state tax incentives for opportunity zones. Senator Michael Gianaris leads the efforts, saying the OZ program is “being abused to grant tax breaks to already overdeveloped neighborhoods.”

The proposed law still needs sign-off from NY Assembly members and Gov. Kathy Hochul. Last year, New York legislators separated its capital gains tax code from the federal program. North Carolina, California, Massachusetts, and Mississippi have passed similar laws recently. The federal Opportunity Zone program was established in 2017, enabling investors to defer capital gains taxes if investing in economically distressed neighborhoods. The White House estimated in 2020 that between $75 billion to $100 billion had been invested in OZ funds since the program’s inception.

James Whelan, President of the Real Estate Board of NY, said the plan to fight against the OZ program was “yet another move” to push investment away from the state. The program has garnered widespread bipartisan support since 2017 in the U.S. Congress, and new federal legislation was introduced this year to reform the program to add more transparency and reporting requirements. While New York and a few states have fought against Opportunity Zones, many other states have embraced the program. OZ funds have generated much debate about their effectiveness in helping underinvested areas, but no matter the effect of the program the tax incentives will likely keep investments flowing in the years ahead.

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