Investing In Opportunity Act (IIOA)
June 20, 2016
CEO, Greater Phoenix Economic Council
What does it mean to invest in Arizona? As the region’s leading economic development organization, the Greater Phoenix Economic Council works to attract businesses to the Greater Phoenix region to add high quality jobs and create economic opportunity. We work with businesses from around the country – and from around the globe – who are thinking about expanding or relocating, and share with them the many benefits to doing business in the state.
When a company opens an office or relocates their operations to Greater Phoenix, they are making an investment in the region, creating jobs for residents, introducing new products or services to the market and supporting the local economy through direct and indirect consumer activity.
The value these businesses add to the region is impactful. In the more than 26 years GPEC has been operational, the organization has helped bring more than 660 new businesses to the region, creating 115,000-plus jobs and capital investment of more than $10.6 billion.
Businesses are drawn to Greater Phoenix for many reasons, including the large, skilled workforce, supportive business climate, attractive and affordable lifestyle, speed to market, entrepreneurial spirit, and geographic location, among a host of other reasons. These regional advantages are what make Greater Phoenix attractive to companies, and what allows us to compete for and win businesses.
Protecting the assets that draw businesses to the region is critical to attracting high quality jobs. Finding the investment vehicle with which to do so, however, can be challenging. Newly introduced federal legislation, the “Investing in Opportunity Act of 2016,” presents an opportunity to address a challenge faced by businesses and municipalities across the country: lack of access to capital.
Estimates show that U.S. investors hold up to $2.3 trillion in unrealized capital gains from stocks and mutual funds alone. This legislation creates pathways for private investment in distressed or underserved communities, where the inability to access capital is particularly prevalent. By removing a tax disincentive that stands in the way of private sector investment, the Investing in Opportunity Act (IIOA) provides alternate paths for funding economic development related projects.
The IIOA would allow investors to temporarily defer paying capital gains taxes if they invest the money directly into a project within a qualified development zone. And they would receive a discount for a portion of that original deferral if they held the investment for five to seven years. These zones would be determined at the state level, and would generally include low income neighborhoods where funding is often hard to come by.
The legislation also creates a new investment vehicle that would allow multiple investors to pool their resources, thus reducing individual risk, and allowing for great impact in the community. Qualifying projects under the IIOA could include funding for new and small businesses, restoring blighted properties, enhancing local infrastructure, or facility construction or refurbishment.
By directing an incentive toward low income communities, the bill encourages investors to focus their resources on the state’s highest need areas. Stimulating economic activity in areas that have traditionally been underserved fills a critical need and is an effective way to support growth. Additionally, it creates a mechanism for much needed investment in community place-making for urban revitalization that would otherwise lack capital for market turnaround and job creation.
Creating new pathways for private investment means more small businesses and entrepreneurs can find the funding they need to create jobs and scale their operations. The impact these funds could have on local businesses and communities – particularly in Greater Phoenix – is significant.