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Opportunity Zones in Texas: Promise and Peril

October 2018

The Census Tract Selection Process

To begin implementation of the program, each state was responsible for selecting census tracts to be designated as Opportunity Zones. On Feb. 8, 2018, the Internal Revenue Service (IRS) issued basic guidance on the selection process. Each state was required to select tracts, keeping in mind the following requirements: [1]

  • Eligible tracts must have an individual poverty rate of at least 20 percent or median family income of no more than 80 percent of area median income. This is the same eligibility requirement as for New Market Tax Credits (NMTC).
  • Up to 5 percent of the designated Opportunity Zones may come from otherwise ineligible tracts. These tracts can qualify as an exemption as long as: 1) they are contiguous with an eligible tract, and 2) the median family income does not exceed 125 percent of the median family income of the contiguous tract.
  • Up to 25 percent of all eligible tracts can be designated.

While some states requested 30-day extensions, Texas did submit its census tracts to the U.S. Treasury Department by the March 21, 2018, deadline. Texas Governor Greg Abbott’s office selected 628 individual census tracts across Texas, which were approved by Treasury in April of this year. The 628 represent a little over 23 percent [2] of the state’s eligible tracts. While some states took advantage of the contiguous 5 percent exemption, all of Texas’ submitted tracts meet the original low-income requirements. According to the Office of the Texas Governor, several factors were emphasized during the selection process: chronic unemployment, natural disasters within the past two years, and low population density. These were considered “significant economic disruptors” that could benefit from stimulus. The governor’s office also substituted some eligible tracts with “similar metrics recommended by local and state elected officials.”

Notes
  1. Frequently Asked Questions, Economic Innovation Group.
  2. Author’s calculations from Brookings Institution dataset.

Next: Opportunity Zone Demographics »

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