Gianaris’ Effort to End Opportunity Zone Tax Breaks Gains Traction in Senate
The only real opportunity in “opportunity zones” is for real estate developers, if you ask New York State Senate Deputy Leader Michael Gianaris.
That’s why Gianaris is pushing for a bill to end state tax breaks for qualified opportunity zones. The bill passed the New York State Senate on Wednesday and now moves to the New York State Assembly for a vote.
“There is too much power and wealth concentrated in too few hands and they have abused our outdated laws for too long,” Gianaris said in a statement. “The opportunity zone program was intended to help economically distressed areas but is being abused to grant tax breaks to already overdeveloped neighborhoods.”
The bill passed the state Senate with 44 in favor and 17 opposed. But the claim from lawmakers that opportunity zones benefit only real estate developers — and not the communities themselves — may not get much traction from Gov. Kathy Hochul, a leader with strong real estate support who has long advocated for boosting economic development through tax incentives no matter how big the corporation or industry.
Hochul’s office did not comment on the legislation beyond stating that she “will review the legislation if it passes both houses.
The Real Estate Board of New York argued that axing state incentives for developers in opportunity zones would cause them to simply head for greener pastures rather than do business in the Empire State.
“If enacted, this legislation would be yet another move to shift investment away from New York, as it encourages residents with [opportunity zone] investments to go to other states and take their taxable income with them,” REBNY President James Whelan said in a statement. “Furthermore, New York should not walk away from any opportunity to spur development that can address our housing crisis and create jobs in historically underserved neighborhoods, especially as we try to recover from the negative economic impact of the pandemic.”
If the measure becomes law, tax breaks for investors would be eliminated in two strokes.
The first half of Gianaris’ plan was passed in April 2021, where state tax breaks for money going into opportunity zone funds were eliminated. The bill that passed the Senate Thursday would eliminate state tax breaks on the funds once they have remained in the opportunity zone for 10 years. Federal tax breaks will remain in place.
After former President Donald Trump’s federal tax overhaul passed in 2017, New York state was ordered to designate census tracts that qualified as “opportunity zones,” low-income neighborhoods where certain private developments could qualify for tax breaks. However, Gianaris argued the zones often included neighborhoods that were subject to overdevelopment and gentrification to begin with — Williamsburg and Greenpoint, Brooklyn, were both categorized as opporutnity zones despite being some of the priciests areas in the city — and the plan exacerbated these issues.
Gianaris said stripping the ability of developers to invest in these census tracts and maximize capital gains through taxes was part of a larger effort to level the playing field between the haves and have-nots. He said it also would prevent an “unjust giveaway of state resources to the wealthy.”
Gianaris has been a thorn in the side of the real estate industry after he was credited with squashing plans between the state and e-commerce giant Amazon in late 2018 to build a headquarters in Long Island City, Queens, which sits in the state senator’s district. After Gianaris was appointed by Senate Majority Leader Andrea Stewart-Cousins to the Public Authorities Control Board in February 2019, the deal went bust and Amazon decided to take its 1.5 million-square-foot facility elsewhere.
To Hochul, who was former Gov. Andrew Cuomo’s lieutenant governor at the time, losing Amazon was a missed opportunity for the state, and she argued it would have pumped up to $27 billion into the economy over the next decade and help New York rival Silicon Valley for tech jobs. She blamed misconceptions and negative press about the nearly $3 billion in tax incentives the state offered to Amazon as reasons for the failure.
Mark Hallum can be reached at email@example.com.