With contributions from Maria Wolvin and Ben Marsico
This week’s roundup highlights key takeaways from Friday’s congressional hearing about the opportunity zone program and how its tax incentives are impacting small businesses in low-income communities. We also look at another recent hearing, which focused on improving workforce diversity in the financial services industry.
Small Business Subcommittee Weighs Opportunity Zone Impact
Lawmakers held a hearing on Friday that focused on whether a provision of the 2017 tax law has been effective in spurring business growth in economically distressed communities across the country.
Members of the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access heard testimony from a panel of economic development experts about the opportunity zone program and discussed concerns about its deployment, including lack of transparency and a disproportionate focus on real estate.
Lawmakers, including the subcommittee chairman, Rep. Andy Kim, D-N.J., noted the lack of information about projects funded through the OZ program, which offers tax incentives to invest in designated opportunity zones throughout the United States and U.S. territories. To evaluate the effectiveness of the program, there needs to be more data about the investments and how capital is being deployed, argued Rep. Kevin Hern, R-Okla. There are currently no public reporting requirements for opportunity zone investments.
Hearing participants also voiced concerns that real estate is attracting the bulk of opportunity zone investment dollars, and that clearer guidelines and incentives are needed in order for small businesses to benefit from the program.
Speaking before the subcommittee, Aaron Seybert, managing director of social investments for The Kresge Foundation, a private foundation based in Detroit, noted that investors will choose to fund real estate projects over small business investments because real estate generally poses lower risk. He added that many small businesses are not positioned to grow at the accelerated pace of a venture capital-backed technology company, and so the path to exit for an opportunity zone investor is unclear, a further obstacle to steering capital into small enterprises.
Another witness, Brett Theodos of the Urban Institute, suggested adding additional restrictions and incentives designed to attract capital to low-income communities, and he advocated better tracking of investments made through the program.
Diversity and Inclusion Subcommittee Holds Hearing on Workforce Diversity
The House Financial Services Subcommittee on Diversity and Inclusion held a hearing last Thursday on workforce diversity practices in the financial services industry and proposed ways companies can promote and retain diverse talent.
Referring to data the subcommittee requested from large banks, subcommittee Chairwoman Joyce Beatty, D-Ohio, noted that women and people of color remain “woefully underrepresented.” She expressed interest in seeing changes related to pay equity, access to opportunities, interview processes, workplace culture, child care and education.
Suggestions from other committee members included using public disclosures to hold firms accountable; making networking more accessible through increased training and education; requiring that firms look at a diverse pool of candidates when hiring, a proposal inspired by the NFL’s “Rooney Rule”; and urging companies to create accommodations for the elderly and disabled.
The hearing also included mention of the “Enduring Diverse Leadership Act,” which would require that at least one gender-diverse candidate and one racially or ethnically diverse candidate be interviewed for vacancies in the president role at Federal Reserve banks. The bill passed unanimously in the House of Representatives in September and is now awaiting Senate consideration.
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Kathryn Mulligan is Middle Market Growth’s editor-in-chief.