Opportunity zones are not attracting much investment in power projects.

Only $10.9 million of the $15.7 billion invested in such zones in 2019 by investors filing their federal income tax returns electronically was invested in “utility” assets.

The figures are in a background document that the Joint Committee on Taxation staff prepared for a House hearing in late May on leveraging the tax code to encourage infrastructure investment.

There are more than 8,700 low-income areas in the United States that have been designated as opportunity zones. The US government has made a limited-time offer to investors with large capital gains to try to get them to invest in such zones. The offer has two parts.

Part one is the government will wait to collect taxes on capital gains that are reinvested in a business inside an opportunity zone until the end of 2026. When the taxes are ultimately collected, the government will tax only 90% of the reinvested gain if the new investment in the opportunity zone has been held, by 2026, for at least five years, and it will tax only 85% if the new investment has been held, by 2026, for at least seven years.

Part two of the offer is if the new investment in the opportunity zone is held for at least 10 years, then the government will not tax any gain on the new investment when it is sold.

Opportunity zones have been a disappointment so far to renewable energy developers. Some developers were hoping they would be a source of equity capital after the opportunity zone provisions were enacted in late 2017. However, tapping into the capital flowing into such zones has proven difficult. The IRS opportunity zone regulations read like an intricately structured maze. The zones work best for real estate projects. They are harder to make work for investments in operating businesses. (For more detail, see “Opportunity zones and renewable energy” in the June 2019 NewsWire.)