The intention to generate social or environmental benefit is key to impact investing. But a tax break can be an additional incentive.

Among the many provisions of the Republican tax bill signed by President Trump last month is the new “Investing for Opportunities Act,” which lets investors temporarily defer taxes by investing their capital gains in distressed areas designated as “opportunity zones.” Such capital gains taxes can be reduced if such investments are held for five to seven years. The bill also creates “opportunity funds,” or “O Funds,” that help investors locate, execute and share risk on investments in low-income neighborhoods.

With as much as $2.3 trillion in unrealized capital gains in U.S. stocks and mutual funds, the new provision could draw significant investment to low-income communities.

In the end, advocates for community development and renewable energy financing say the final tax bill did less damage than originally feared. The cut in the top corporate tax rate, from 35% to 21%, does lower the value of various tax credits.

Read the full article by David Bank about the U.S. tax bill from ImpactAlpha