The Treasury Department is investigating a federal tax exemption aimed at helping poor communities that became an unexpected gain for wealthy investors, the agency’s deputy general inspector said Wednesday.
The investigation is conducted at the request of three Democratic lawmakers, Senator Cory Booker of New Jersey, Representative Emanuel Cleaver II of Missouri and Representative Ron Kind of Wisconsin.
Lawmakers made their request after articles in The New York Times and ProPublica raised questions about the Opportunity Zone tax exemption.
The legislation, part of the 2017 tax review, is supposed to encourage new investments in poor neighborhoods, generating new homes, businesses and jobs. However, wealthy investors are joining the initiative, including developers with ties to the Trump administration.
Last year, The Times reported how the money eligible for the tax exemption, backed by Democrats and Republicans, would go to luxury projects in thriving neighborhoods, including agreements that were under way long before the tax exemption came into effect. taxes.
In October, The Times described how financier Michael Milken would benefit from a measure that the Treasury Department made on the objections of some agency officials to allow a stretch of the Nevada census to qualify for the Zone’s tax exemption. Opportunity. Milken has long been a friend of Treasury Secretary Steven Mnuchin.
“Despite these staff warnings, Secretary Mnuchin ordered Treasury officials to allow the non-eligible treaty to qualify for the incentive,” lawmakers wrote when requesting the investigation. “If the Treasury Department provided a seal of approval as a political favor, it is not only unacceptable, but completely violates the intention of the Opportunity Zones Congress.”
The Treasury’s internal control agency hopes to “complete our work and respond to congressional applicants in early spring,” Rich Delmar, deputy general inspector of the department, said in a statement.
Other possible beneficiaries of the Opportunity Zone tax exemption, the Times reported last year, were billionaire financiers like Leon Cooperman; Chris Christie, the former governor of New Jersey; Richard LeFrak, a New York real estate titan who is close to the president; and the family of Jared Kushner, son-in-law and principal adviser to Trump.
The initiative allows people to sell stocks or other investments and delay capital gains taxes for years, provided they put the income into projects in federally certified opportunity areas. Investors can avoid federal taxes on the profits of those projects.
At the end of December, The administration finished the program regulations. Authorities said the regulations gave investors more clarity and flexibility on how to deploy their money and bring more funds to the designated areas.
NBC News previously reported the news of the investigation.