Last year, President Trump pushed through a new real estate initiative that gives huge tax breaks to developers who invest in economically depressed communities. According to the Associated Press, the program, known as Opportunity Zone, was pushed for by Donald Trump’s daughter Ivanka Trump as well as her husband, Jared Kushner—and now, it seems that Kushner and Ivanka stand to profit from this very policy.
That sounds very corrupt! But it’s not all bad, right? I mean, even if they are putting money into their own pockets with a tax break, it’s good to invest in economically struggling areas, like, uh... *checks notes*... Brooklyn and the Jersey Shore?
Trump and Kushner jointly own a big stake in a real estate investment firm, Cadre, that recently announced it is launching a series of Opportunity Zone funds that seek to build major projects under the program from Miami to Los Angeles. Separately, the couple owns interests in at least 13 properties held by Kushner’s family firm that could qualify for the tax breaks because they are in Opportunity Zones in New Jersey, New York and Maryland — all of which, a study found, were already coming back.
So if the Opportunity Zone project isn’t putting money into areas that need it, why does the policy exist at all? Well, it seems that someone stands to gain from this; just not poor people.
[Developers] are flocking to what financial analysts say are some of the most generous tax benefits they have ever seen. Investors who plow capital gains from previous investments into Opportunity Zone projects can defer taxes on those gains up to 2026. If they decide not to cash out their investment for seven years, they get to exclude up to 15 percent of those gains from taxes. And they can permanently avoid paying taxes on any new gains from investment in the zones if they hold onto the investment for a decade. With capital gains taxes as high as 23.8 percent, the savings can easily add up.
It’s important to note that there’s no suggestion Kushner and Ivanka were involved in choosing where the Zones are: White House spokesman Hogan Gidley tells AP that the decision-making around Opportunity Zones is up to the governors of various states, who nominate areas “based on what underserved areas would benefit most.... The White House has nothing to do with those decisions.”
There’s also no evidence so far that the couple will make use of the tax breaks that would be available to them under the program. Even so, it’s an ethical quagmire, because neither Ivanka nor Kushner divested themselves of all their real estate businesses before joining the administration.
Ivanka’s attorney insists she has done nothing wrong: “Ms. Trump has divested assets, set up trusts, removed herself from businesses and decisions about her investments,” Abbe Lowell, ethics counsel for the couple, told AP. “In addition, she adheres to the ethics advice she has received from counsel about what issues she can work on and those to which she is recused.”
Nevertheless, it’s undeniable that Ivanka had a hand in making the initiative happen, according to AP:
“Creating the incentive to bring capital into communities that are currently being overlooked is just a tremendous opportunity,” Ivanka Trump said as her father and a crowd of supporters nodded during the White House session February 14.
Last month, at a dinner in Washington put on by the conservative Kemp Foundation, [Sen. Tim] Scott singled out Ivanka Trump as his point person on the initiative. “When we were looking for help to get the tax bill across the finish line,” he said, “I kept looking to the same person for help in the White House.”
The AP report notes that “[the couple’s financial disclosures] state they must recuse themselves from dealing with policy matters that touch on real estate and ‘would have a direct and predictable effect on Cadre.’”
And yet, it’s nearly inevitable that Cadre will end up benefitting from the initiative. According to Cadre CEO Ryan Williams, the company is starting an Opportunity Zone investment fund, and plans on beginning developments in areas of Los Angeles, San Francisco, Seattle, Portland, Phoenix, Houston, Atlanta, Philadelphia and Miami. And as AP points out, the couple’s businesses may well benefit from this policy even if they do not claim tax benefits, as other developments in Opportunity Zone areas will inevitably raise property values across the board.