OZ Pitch Day - June 19
Fixing Opportunity Zones for Small Business Investment
While the original policy intent behind Opportunity Zones was to catalyze more entrepreneurship and small business investment in disadvantaged communities all across the nation, most OZ capital has flowed into real estate.
Jonathan Goldstein of Advantage Capital joins the show to discuss how a few targeted legislative fixes could finally make the OZ incentive work for operating businesses, especially in rural and underserved communities.
Guest: Jonathan Goldstein, Advantage Capital
About The Opportunity Zones Podcast
Hosted by OpportunityZones.com founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.
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Episode Summary
In this episode of The Opportunity Zones Podcast, Jimmy Atkinson is joined by Jonathan Goldstein, managing director at Advantage Capital, to discuss how OZ policy can be retooled to better serve its foundational mission—stimulating investment in operating businesses in underserved communities, including rural America. The conversation takes place against the backdrop of ongoing legislative reform efforts in Congress, as the House has just passed its reconciliation bill with OZ 2.0 provisions and the Senate begins drafting its own version.
Advantage Capital’s Mission: Capital & Community Impact
Jonathan opens with an overview of Advantage Capital, a pioneer in impact investing for over three decades. The firm specializes in deploying capital to small and mid-sized businesses that are traditionally overlooked by conventional financing. Since inception, Advantage has invested more than $4.5 billion in over 1,000 businesses, generating 77,000+ jobs with average salaries exceeding $59,000—a major lift for economically distressed areas.
Importantly, the firm has channeled nearly $900 million into rural communities, supporting over 17,000 jobs and attracting an estimated $1.3 billion in follow-on private capital. Their investment thesis bridges public-private incentives—Opportunity Zones, New Markets Tax Credits, and state-specific programs—to direct capital where it’s most needed.
Rural Communities and the Missed OZ Opportunity
Jonathan notes that while the Opportunity Zone incentive was designed to benefit both urban and rural communities, only about 8% of OZ capital has reached rural tracts, despite these areas representing roughly 23% of all designated zones. This underutilization points to deep structural barriers in OZ legislation that disproportionately disadvantage rural and small-town businesses—particularly those without a real estate development angle.
He recaps the tone of the Opportunity Zone Policy Summit in Washington DC, where bipartisan support for small business investment reforms was on full display. The event—hosted by Sen. Tim Scott’s Great Opportunity Policy Inc.—featured voices across the political spectrum and executive agencies, including HUD Secretary Scott Turner and staff from Secretary Bessent’s team, all voicing support for making OZs more inclusive of business investment.
Why OZs Don’t Work for Businesses (Yet)
Jonathan outlines two major technical flaws in the current Opportunity Zone statute that effectively lock out the majority of real operating businesses from accessing OZ equity:
1. Interim Gains and Reinvestment Penalties
Unlike real estate projects that can hold assets for 10+ years, many business investments—especially in venture, manufacturing, or services—require shorter hold periods and liquidity events. Under current law, if an OZ fund exits an investment early, investors must recognize a capital gain on the sale, losing the 10-year tax-free growth benefit unless they liquidate the entire fund.
This structure disincentivizes capital recycling and undermines the economics of portfolio investing. Jonathan argues for a statutory fix that would allow funds to reinvest proceeds from interim exits without resetting the 10-year clock, preserving the full OZ benefit for long-term investors.
2. The “Good Assets” Test
To qualify as an OZ business, at least 70% of a company’s tangible property must meet rigid criteria (e.g., acquired after 2017, new or substantially improved, used within the zone). However, most existing small businesses—particularly those already operating in these communities—fail this test due to legacy assets, equipment, or prior ownership structures.
Jonathan shares the example of a rural manufacturer that would need to triple its asset base to meet compliance, simply because its equipment was purchased before the OZ program existed. He proposes eliminating this arbitrary test and replacing it with a commonsense standard: capital must flow into the business and not be used for affiliate buyouts or owner windfalls.
Practical Fixes, Not Expansion
Importantly, Jonathan stresses that these proposals aren’t about expanding OZs, but about making them work as originally intended. Advantage Capital isn’t lobbying for new carve-outs, loopholes, or speculative perks. Instead, they’re calling for two surgical fixes—interim gain relief and asset test removal—that would unlock thousands of business investments already aligned with the spirit of the program.
He adds that these changes could be enacted with minimal fiscal cost and no significant increase in IRS enforcement complexity—an attractive proposition for lawmakers seeking bipartisan wins in a tightly contested Senate.
Why Now Matters
The timing of the conversation is critical. With the House bill already passed, the Senate is preparing to write its own OZ 2.0 provisions. The window to influence policy is now. Jonathan encourages stakeholders—especially fund managers, CDFIs, and mission-aligned investors—to engage directly with legislators to advocate for these improvements.
These modest reforms could reposition Opportunity Zones not just as a real estate vehicle, but as a nationwide engine for entrepreneurship, manufacturing, and middle-class job creation in communities that have been systematically underinvested for decades.