North Carolina picks new Opportunity Zones that could attract billions

State of play: The federal Opportunity Zone program was introduced during the first Trump administration to encourage investments in lower-income areas.

• The program —  made permanent in last year's One Big Beautiful Bill — lets investors earn capital gains tax savings if they invest the money in projects in opportunity zones.
• Most valuably, though, any appreciation that money makes from the investment in an opportunity zone can be exempt from capital gains tax if it leads to "substantial improvement" of the land and is held for 10 years. That could look like many things, including an apartment building or a data center.

Zoom in: Those potential tax savings proved popular with real estate investors, who, in the first iteration, had 8,000 opportunity zones to choose from, including more than 250 in North Carolina.

• More than $150 billion has been invested in opportunity zones since 2017. But it's hard to access the impact of all that money, says Brett Theodos, a senior fellow at the Urban Institute, who has studied the program.
• That's because only a few states track what has been built through the Opportunity Zone designation, most notably Ohio, according to Theodos.
• "We only have this information for one of the 50 states," Theodos said, but what that data tells us is that the vast majority of these investments are turning into apartment projects.
• The investments are also mostly flowing into census tracts in cities that were already showing signs of growth rather than more distressed ones. Two-thirds of opportunity zones in Ohio received no investments, while most of the money went to cities like Cleveland and Columbus.

What they're saying: "This is a once-a-decade chance to shape the biggest federal place-based program in the country that moves billions of dollars into or around the state," Theodos told Axios. "So [tract] selection is of critical importance that everyone should be attending very carefully."

Case in point: Some of the most notable Opportunity Zone projects in the Triangle have come to areas that were already seeing significant investment, including:

• The redevelopment of Chapel Hill's largest office tower on Franklin Street. (That tract was eligible because students don't make much income.)
• Kane Realty's potential Downtown South project, which could add hundreds of apartments and a soccer stadium.

• And the construction of the luxury Maeve apartment tower on the edge of downtown Raleigh.
• "By investing in Maeve, investors from North Carolina and beyond are able to participate in Raleigh's growth engine," Louis Rogers, the founder of Capital Square, the building's investor, said in a statement at the time of the building's completion. "And the icing on the cake for investors — taxes on the sale of Maeve will be forgiven after a 10-year holding period under the opportunity zone legislation."

What's next: The criteria for the second round of Opportunity Zone selection has changed slightly. There are more perks for investments in rural areas and the tracts must now have a median family income of 70% or less of its metro area's average or a poverty rate greater than 20%.

• But North Carolina is planning to be more strategic in its selection this time, and has met with the Urban Institute to discuss the program, according to the state's Commerce Department.

The department says it is prioritizing tracts across three guiding principles:

1. Tracts that could create jobs, like ones included in the state's megasite program, or tracts with economic development projects already underway that will need more investment.
2. Tracts that local communities already have plans for, whether that is the redevelopment of an industrial site or other community revitalization projects.
3. Tracts in areas in need of more housing, especially near major employment centers or transit corridors.