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A major affordable housing developer has requested an exemption to proposed legislation that would decouple Oregon’s tax treatment of opportunity zone projects from federal tax benefits.

Legislators are considering a bill that would eliminate state tax benefits for one year while the federally recognized opportunity zones play out in Oregon and across the nation.

While most opportunity fund investments in Portland have flowed to large and expensive market-rate projects, some affordable housing developers are using opportunity zone benefits to attract investors.

鈥淲e are using opportunity zones 鈥� mostly in affordable housing deals,鈥� said Cynthia Parker, chief executive of BRIDGE Housing, one of the West Coast’s largest developers of affordable housing.

Parker submitted written testimony to the Oregon Legislature lobbying for an exception for affordable housing if the bill, House Bill 4010, is passed.

鈥淪ince the 2017 Tax Cuts and Jobs Act was passed, BRIDGE has worked diligently with investors to educate and promote usage of the (opportunity zone) program for the benefit of affordable housing developments,鈥� Parker wrote. 鈥淲e strongly recommend that a carve-out be made that would allow (opportunity zone) investors to receive tax benefits from both the federal and state if the underlying Qualified Opportunity Zone Business were an affordable housing development.鈥�

A carve-out would create a 10 percent to 20 percent increase in yield for investors, Parker estimated. That makes it appealing for socially minded investors.

鈥淚t’s going to be a special-impact investor who wants to make a difference,鈥� Parker said. 鈥淚t’s not a deep subsidy; it was never intended to be a deep subsidy.鈥�

BRIDGE Housing is seeking investors for an affordable housing project in Southwest Portland’s RiverPlace area, Parker said.

The so-called 鈥渄ecoupling鈥� bill would dent the tax benefits for investors in Portland’s opportunity zone, which has received national attention for its location in highly desirable areas including downtown, portions of the Pearl District and Central Eastside Industrial District.

By reducing the tax benefit investors could expect, it could also make it more difficult for affordable housing developers to raise funds.

Democrats and tax-fairness critics have blasted opportunity zones for offering capital gains tax benefits that go to wealthy investors. Critics argue that many opportunity zone projects would still get built without the subsidies.

鈥淲ho’s going to not invest because they got a haircut?鈥� said Bennett Minton, a tax policy watchdog with Tax Fairness Oregon. 鈥淓ither the projects work or they don’t.鈥�

Bill sponsor Rep. Nancy Nathanson, D-Eugene, did not directly answer questions about Parker’s carve-out request. Nathanson serves as chairwoman of the House Revenue Committee.

鈥淭he conversation is ongoing about the opportunity zones legislation and the issue remains in flux,鈥� she stated in an email. 鈥淚 remain committed to a conversation about the value of opportunity zones.鈥�

In Portland, opportunity zone investments have so far gone to large market-rate projects including the Block 216 mixed-use tower, the PAE Living Building and a proposed Sturgeon Development Partners office building.

Opportunity zones offer a number of tax benefits. Primarily, they encourage investors to hold onto a property for 10 years to avoid capital gains tax.

Other affordable housing developers are watching and waiting. Dan Valliere, CEO of REACH Community Development Corp., said the nonprofit is not actively pursuing opportunity zone funding. He questioned whether opportunity zones will help spur investment where it’s most needed.

鈥淭he way it’s structured now, there’s very little accountability to make sure this is creating social impacts,鈥� Valliere said. 鈥淭hey’re just standard real estate investments, which is fine. But it doesn’t really make sense to give it a tax benefit.鈥�