By Henry Ashcroft
WASHINGTON — Wednesday is the last day for most governors to tell the Treasury Department which low-income neighborhoods should get the next decade of Opportunity Zone tax breaks. As of Tuesday, New York had not publicly said which tracts it would choose.
The deadline is the extended cutoff under Treasury’s nomination process for “OZ 2.0,” the renewed version of the program created by President Trump’s 2017 tax law and made permanent by the 2025 tax law the administration calls the Working Families Tax Cuts. Every jurisdiction got an automatic 30-day extension past the Sept. 28 statutory deadline unless it opted out. That pushed the cutoff to Oct. 28, according to OpportunityZones.com.
The stakes are long-lived. New designations take effect Jan. 1, 2027, and last 10 years. Treasury has warned that “jurisdictions that do not nominate an eligible tract during this window would not have another opportunity until the next designation cycle.”
The administration’s pitch
Treasury Secretary Scott Bessent cast the new round as a chance for states to steer private money into struggling places.
“Under President Trump’s leadership, the Working Families Tax Cuts permanently renewed and strengthened Opportunity Zones, giving investors, entrepreneurs, and local leaders the long-term certainty they need to commit capital to communities that have been overlooked for too long,” Mr. Bessent said when Treasury opened the window July 1. “With the nomination period now open, governors have the opportunity to help direct private investment to communities that stand to benefit most.”
The new law tightened the program. A tract now qualifies only if its median family income is at or below 70 percent of the area median, down from 80 percent, or if it has a poverty rate of at least 20 percent and its income is not above 125 percent of the area median. The old rule allowing higher-income tracts to qualify because they bordered poor ones is gone. Investors in rural zones get a 30 percent basis step-up after five years, compared with 10 percent elsewhere.
Critics of the first round, which began in 2018, argued that much of the money went to neighborhoods that were already gentrifying. Commercial Observer, citing the National Community Reinvestment Coalition, reported that about 42 percent of OZ investment went to 1 percent of zones and that 75 percent went to market-rate residential projects.
Where New York stands
New York has 1,716 eligible tracts and can nominate no more than 429, or 25 percent, according to OpportunityZoneInvest.com, which tracks Treasury’s eligibility data. In 2018 the state had 514 zones. As of Oct. 27, neither Empire State Development nor Treasury had published a New York nomination list or confirmed a filing, according to both OpportunityZoneInvest.com and the OpportunityZones.com state tracker.
“New York is taking a targeted, statewide approach to Opportunity Zone designations, with a focus on directing investment to communities where it can support economic growth and development,” ESD spokeswoman Emily Mijatovic told Commercial Observer in September. She said ESD was weighing “community need, housing growth, geographic balance and regional input.”
Nationally, the tracker counted 2,489 tracts nominated across 23 states as of Tuesday, about 38 percent of the 6,575 designations expected.
What it means for Western New York
Erie County has 84 tracts eligible for OZ 2.0, mostly in Buffalo, and 27 of its tracts overlap a current zone, according to OpportunityZoneInvest.com’s tract tables. Niagara County has 22 eligible tracts, Chautauqua 19 and Cattaraugus 16. Every eligible tract in Chautauqua and Cattaraugus counties is classified as rural, which means investments there would qualify for the larger tax break.
Because the statewide cap is only a quarter of the eligible tracts, upstate cities are competing with hundreds of eligible tracts in Brooklyn, Queens and the Bronx. Developers want continuity in places where they are already building.
“Developers are most concerned about places they already have projects in the pipeline that they maybe haven’t broken ground on yet,” Jamie Ansorge, a principal at the law firm Cozen O’Connor, told Commercial Observer. “It’s critical to have those zones redesignated under 2.0 to ensure continuity for investors.”
Investors have argued that the incentive works. “I believe it’s produced a lot of housing units in a lot of areas around the country where housing is in short supply,” Chris Milner of Cantor Fitzgerald Asset Management told the publication.
What happens next
Once a state files, Treasury has 30 days to certify its nominations, plus another 30 if the governor asks. For states using the extension, that means certification by Nov. 27, or by Dec. 27 at the latest, according to OpportunityZones.com. The original 2018 zones remain in effect through 2028.
Neither Empire State Development nor Treasury had said publicly by Tuesday night whether New York has filed or which Western New York tracts are on its list. The Buffalo Chronicle will update this story when the list is released.
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