By Ashley Schultz

The 2020 grant landscape contains dozens of education, workforce development, and public safety programs offering priority consideration for projects deployed inside a Qualified Opportunity Zone (QOZ). This classification originates with the US Department of Treasury and - at its core - has absolutely nothing to do with grants. Zones are selected by individual State Governors as a way to bring private financial investment into distressed communities. So you might find yourself wondering, “why does language about QOZ tax breaks and capital gains continue to pop up in our grants world?”

The crossover is directly connected to the practice of compounding federally funded grant projects with outside investment. The Trump administration has championed the idea that small federal investment (e.g. a one-time $500,000 grant) should be combined with larger investment from private companies and financial institutions. The result is a project that extends its reach far beyond what is possible inside a single grant proposal.

We’ve seen this line of thought take shape across multiple grant agencies. The USDOT’s Infrastructure for Rebuilding America (INFRA) Program, for example, replaced one of its four pillars in 2017. Applicants are now required to “Leverag[e] Federal funding to attract other, non-Federal sources of infrastructure investment.” This shift in focus for the grant program encourages tax-funded transportation projects to seek private-sector investment in order to be selected for grant funding. The USDOT suggests projects “raise revenue directly” or take advantage of “broad-scale, innovative financing” as two possible options for scoring points under this new pillar. 

Priority consideration for QOZs operates in much the same way. I’m happy to report that taking advantage of these bonus points does not involve a week-long dive into the US tax code or learning how to invest capital gains inside needy communities. Grant seekers need only to understand what the QOZ designation means, where QOZ communities exist, and how to incorporate the unique needs of these places into a larger grant project.   

Qualified Opportunity Zones: Understanding the Basics

According to the IRS, Qualified Opportunity Zones are designed to spur economic development and job creation in distressed communities. Investors active in these areas have the option to place capital gains into newly dubbed ‘opportunity funds’, where they can be used as seed money for new start-up companies, business expansions, new housing, and a myriad of other investments to revitalize individual census tracts. 

The QOZ program began in April 2018 with 18 communities. Since that time, it has expanded to include 8,766 individual census tracts across all 50 states, six territories, and the District of Columbia. Combined, these tracts represent more than 30 million US citizens living and working in a variety of urban, suburban, and rural settings. 

A brief glimpse at population and demographic statistics of these 8,766 census tracts validates that they encompass some of the highest-need communities in the United States - 

Measure	Qualified Opportunity Zone Average	US Average
Population Growth Rate (2006-2010)	0.6%	6.3%
Rate of Poverty	27.7%	14.1%
Median Family Income	$47,316	$73,965
Adults (ages 25-54) not Working	31.1%	22.2%
Adults without a High School Diploma	21.1%	12.4%
Adults with a Bachelor’s Degree or Higher	18.1%	31.5%

Source: Economic Innovation Group, https://eig.org/opportunityzones/facts-and-figures. 

Quality of life outcomes inside QOZs are even more dire when we expand our scope to encompass their troubled housing markets, higher rates of incarceration, poor health, and lower life expectancies. 

Outside investment stands to significantly bolster distressed QOZ communities. Estimates by the Economic Innovation Group show that unrealized capital gains eligible for incentives inside these zones is in the trillions of dollars. Investment of even a fraction of that amount into small businesses, real estate, and public infrastructure could have a significant impact on residents’ ability to rise out of poverty and achieve better life outcomes. 

Qualified Opportunity Zones: Incorporating into Grant Proposals

So, what does this all mean for the bottom line on grant proposals? 

First and foremost, it’s important to note there are currently no grant funding opportunities expressly for QOZ communities. Grant language surrounding these 8,766 census tracts has so far only come in the form of priority consideration - think bonus points - for proposals within a larger pool of applicants. As a grant writer for a particular agency or region of the US, this means you should be familiar with all QOZs that could potentially play a role in your future grant projects. Check out the map above for more. 

Second, spend some time digging into statistics surrounding quality of life outcomes for both QOZ and non-QOZ census tracts. We all know that strong grant proposals present the reader with concrete evidence on the overall need of program participants. Seeking priority consideration for QOZ census tracts is no different. If you have space in the narrative, consider a discussion on how these individual tracts compare to the rest of your program area. Yes, the rate of poverty inside your QOZ may be 26%, but it’s worth noting if a neighboring, non-QOZ census tract has a rate of 22%. Both areas are well above the US-average rate of poverty (14.1%) - illustrating to the reviewer that your mission is strongly needed across your entire project area. If the statistics are drastically different between your QOZ and non-QOZ census tracts, adjust your narrative to explain how your agency will customize program roll-out in each area - thus illustrating that you understand individual census tracts may require a unique set of demands on your proposed project.

With your list of QOZs and relevant statistics in hand, your last step is to be on the look-out for grant proposals that seek to compound grant investments with private dollars. A few of our Grants Office favorites are listed below. We expect to see priority consideration for QOZs to continue in dozens of grant programs well into 2020 and 2021. 

1. Comprehensive Opioid, Stimulant, and Substance Abuse Site-based Program (Deadline May 21, 2020) - This grant aims to reduce the impact of opioids, stimulants, and other substances. Projects work to reduce the number of overdose fatalities and/or mitigate the impacts on crime victims by supporting comprehensive, collaborative initiatives. Priority consideration will be provided for applicants who offer enhancements to public safety in economically distressed communities.
2. Distance Learning and Telemedicine (DLT) Program (Deadline July 13, 2020) - This grant works to improve telemedicine and distance learning services in rural areas through the use of telecommunications, computer networks, and related advanced technologies that students, teachers, medical professionals, and rural residents can use. Special consideration will be given to applications that have at least one end-user site physically located in a Qualified Opportunity Zone. YouthBuild Grant Program (Anticipated Deadline August 2020) - This grant works to provide occupational skills training in order to prepare disadvantaged youth for career placement. These projects also support the influx of affordable housing within communities by teaching youth construction skills learned by building or significantly renovating homes for sale or rent to low-income families or transitional housing for homeless families or individuals. It is anticipated that applicants may receive up to two bonus points for including at least one census tract in their service area that is designated as a Qualified Opportunity Zone.

 

If you’d like to read more on Qualified Opportunity Zones, check out these additional resources below:

 

●       IRS: Opportunity Zones Frequently Asked Questions - https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

●       US Department of Treasury: Opportunity Zones Resources - https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx

●       Final US Regulation: Investing in Qualified Opportunity Funds - https://www.irs.gov/pub/irs-drop/td-9889.pdf