Opportunity Zone Investment Figures: Treasury Data (2018–2020)
This information is derived from U.S. Treasury Office of Tax Analysis, Working Paper 123 — “Use of the Opportunity Zone Tax Incentive: What the Data Tell Us” (Coyne & Johnson, July 2023). It utilizes IRS Forms 8996 and 8997 for tax years 2018–2020.
Qualified Opportunity Fund (QOF) Expansion: $4 Billion to $44 Billion in Two Years
| Tax Year | Number of QOFs | QOZ Property | Total QOF Assets |
|---|---|---|---|
| 2018 | ~1,300 | $4 billion | $4 billion |
| 2019 | ~5,800 | $28 billion | $30 billion |
| 2020 | ~7,800 | $44 billion | $48 billion |
Data from IRS Form 8996 returns. Paper returns that have not yet been transcribed are excluded (< 6% of total).
QOF Oversight: Entity Formats
Partnerships are the predominant entity type among QOFs, which is intentional, as their pass-through structure optimizes the distribution of tax advantages to individual investors.
| Entity Type | Share of QOFs (2020) | Share of QOZ Property (2020) | Avg. Assets |
|---|---|---|---|
| Partnerships (Form 1065) | 94% | 89% | ~$6M |
| C-Corporations (Form 1120) | 2% | 10% | ~$37M |
| S-Corporations (Form 1120S) | 4% | 1% | ~$1M |
C-Corporation QOFs are uncommon yet substantial, holding average assets of $37M compared to $6M for partnerships.
Capital Deployment: Sector Distribution
Real estate accounts for most Qualified Opportunity Zone (QOZ) property investment, aligning with the program’s objective to encourage tangible asset deployment in specific zones.
Sector Distribution at the QOF Level
| Sector | 2019 Share | 2020 Share |
|---|---|---|
| Real Estate, Rental & Leasing | 60% | 57% |
| Finance & Insurance | 22% | 23% |
| Management / Holding Companies | 4% | 6% |
| All Other | 14% | 14% |
Sector Distribution at the QOZB Level (Operating Companies)
| Sector | 2019 Share | 2020 Share |
|---|---|---|
| Real Estate, Rental & Leasing | 67% | 68% |
| Finance & Insurance | 5% | 5% |
| Professional & Technical Services | 4% | — |
| Construction | — | 4% |
| All Other | 24% | 23% |
Geographical Scope: 48% of All Opportunity Zones Attracted Investment by 2020
By year-end 2020, 48% of all designated Opportunity Zones had secured at least one qualified investment via a QOF. While investment reached every state, demonstrating broad geographical coverage, its distribution was remarkably disparate.
| Geography Type | Share of OZs | Share of QOZ Property (2020) |
|---|---|---|
| Urban tracts | 86% of all OZs | 95% of investment |
| Contiguous tracts | 2% of all OZs | 5% of investment |
| Located in Empowerment Zone | 5% of all OZs | 6% of investment |
Urban Opportunity Zones attracted an unequal proportion of capital. Rural zones, however, continue to be considerably underfunded when compared to their percentage of designated tracts.
State-Specific Investment Concentration (2020)
| State | QOZ Property (2020) | % of OZs with Investment | Per-OZ Average |
|---|---|---|---|
| California | $4.8B | 52% | $5.5M |
| New York | $3.9B | 47% | $7.6M |
| Texas | $2.6B | 41% | $4.1M |
| Florida | $2.0B | 49% | $4.7M |
| Utah | $1.5B | 74% | $33.5M |
| Colorado | $1.5B | 75% | $11.5M |
| Arizona | $1.7B | 72% | $10.4M |
| Oregon | $990M | 76% | $11.5M |
| DC | $440M | 80% | $17.6M |
| Illinois | $320M | 20% | $1.0M |
Utah is notable: notwithstanding a moderate overall investment volume, its average per-Opportunity Zone amount of $33.5M represents the nation’s highest — a result of focused institutional investments in a select few zones with strong potential.
Opportunity Zone Capital Attraction: The Selection Indicator
The Treasury’s analysis indicates that investments did not consistently target the most economically distressed zones. Tracts that secured Qualified Opportunity Zone property investment exhibited demonstrably superior pre-existing fundamental conditions:
| Characteristic | Tracts That Received Investment |
|---|---|
| Median household income | Higher than non-invested OZs |
| Educational attainment | Higher |
| Homeownership rate | Higher |
| Unemployment rate | Lower |
| Pre-designation income growth trend | Positive |
| Pre-designation population growth | Positive |
| Pre-designation housing value growth | Positive |
| Pre-designation poverty rate trend | Declining |
Investor takeaway: Investment capital tends to gravitate towards zones already showing upward momentum, rather than those experiencing the greatest hardship. The Opportunity Zone incentive serves to enhance current developmental paths, rather than altering them. This observation supports the OZ Explorer scoring methodology, which considers both existing growth trends and the severity of distress.
Tax Benefit Calculations: Treasury’s Net Present Value (NPV) Review
Considering a $1M gain placed into a QOF in 2021, maintained for 15 years, and applying a 5% discount rate and a 20% capital gains rate:
| Benefit Component | Value | Share of Total |
|---|---|---|
| 10-year appreciation exclusion | ~$192,000 | ~77% |
| Deferral + partial exclusion of deferred gain | ~$58,000 | ~23% |
| Total NPV of tax benefit | ~$250,000 | 100% |
With increased rates of return (for example, a 20% IRR), the portion of the total benefit attributable to the 10-year exclusion grows to 95%+. The main driver for investment is not deferment, but rather the permanent exemption of appreciation.
Opportunity Zones Compared to Previous Federal Place-Based Initiatives
| Program | Capital Type | Government Role | Eligible Taxpayers |
|---|---|---|---|
| OZ (TCJA 2017) | Investment from capital gains only | States make nominations; investors decide | Any taxpayer possessing eligible gains |
| NMTC | All equity types | CDFI Fund is responsible for credit allocation | Any type of investor |
| Empowerment Zones | Focused on employment and capital | Federal government selects; a strategic plan is mandated | Businesses located within the zone |
In contrast to NMTC, QOFs perform self-certification and deploy capital autonomously within established legal parameters. Different from EZs, the advantages of Opportunity Zones principally benefit the investor, rather than the local workforce.
Data is derived from U.S. Department of the Treasury, Office of Tax Analysis Working Paper 123. The research was carried out using secure IRS data repositories. All findings have been examined to ensure no confidential taxpayer information is disclosed.