Just over a year ago, the pro-growth Tax Cuts and Jobs Act of 2017 was signed into law. In addition to the tax cuts that benefited both families and small businesses in Arkansas, the legislation also established qualified Opportunity Zones.
These zones are designed to attract companies and businesses to invest in economically distressed communities through federal government tax incentives such as eliminating the capital gains tax. There's a direct relationship between incentivizing investment in low-income communities and fostering economic revitalization and job creation.
Opportunity Zones were a vision of former Housing and Urban Development Secretary and Congressman Jack Kemp. I had the privilege to work with and be mentored by Secretary Kemp when I worked in the administration of President George H.W. Bush. One of Secretary Kemp's disappointments was never being able to witness his vision become a reality.
Fortunately, for Arkansans and citizens across the country, we now can take advantage of Secretary Kemp's innovative vision.
The Tax Cuts and Jobs Act authorized the creation of over 8,700 Opportunity Zones consisting of nearly 35 million Americans spread across the country. Treasury Secretary Steve Mnuchin predicts $100 billion in capital will be invested into these areas.
President Trump also recently signed an executive order establishing the White House Opportunity and Revitalization Council, which will be chaired by Secretary of Housing and Urban Development Ben Carson. The council will engage with all levels of government on ways to better use public funds to revitalize low-income communities.
In Arkansas, Gov. Asa Hutchinson designated 85 Opportunity Zones, including 14 areas in the 2nd Congressional District, with eight in Pulaski County alone. New capital investment can benefit all Arkansans.
To expand the power of these Opportunity Zones within our state and ensure proper execution, I encourage Arkansas' General Assembly to pass companion legislation that would provide state-level tax incentives and benefits further spurring investment, job creation, and economic revitalization in our communities.
States like Ohio and South Carolina have already considered state-level counterpart legislation. Ohio's legislation creates a 10 percent state tax credit for taxpayers who invest in Ohio-based Opportunity Zones, while South Carolina's creates a 25 percent state-level tax credit for companies that invest in their Opportunity Zones.
Puerto Rico, which has suffered significant devastation recently, also has comprehensive legislation that, in addition to private investment incentives, would provide benefits to businesses already operating within Opportunity Zones. Examples include a 20 percent tax on the net income; exempt-interest dividends; partial exemption in license fees and property taxes; 100 percent exemption from construction taxes; and the creation of a transferable investment credit of up to 15 percent for priority projects.
Using Puerto Rico's model, Arkansas can go one step further to create local-level incentives in addition to the state level.
I urge county and city governments to find innovative benefits to encourage companies to start or relocate their business in Opportunity Zones located in their jurisdictions. Incentives could be anything from reducing regulatory burdens, lowering utility costs, zoning incentives, and tax abatements. There is no limit of innovative options, and I look forward to working with our state and local governments to find mutually beneficial solutions.
These Opportunity Zones have created a unique opportunity for Arkansas to have an influx of private capital that we otherwise would not be able to secure. I want to ensure we are doing everything within our power to successfully revitalize these areas within our state.
If the Arkansas General Assembly successfully passes legislation that provides additional state- and local-level incentives for Opportunity Zone investment, our state will serve as a model that many other states will then look to as an example. Furthermore, state-level legislation can pave the way for local action.
As the General Assembly convenes, let's enhance opportunities for growth in the Natural State.
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U.S. Rep. French Hill represents Arkansas' 2nd District.
Editorial on 01/19/2019