Break And Build

The never-told story of how an unlikely group of billionaires and politicians quietly passed a  law that revolutionizes investment in struggling regions—and offers one of the greatest tax avoidance opportunities in American history.

- Steven Bertoni

Success Street in North Charleston, South Carolina, might be the most misnamed place in America, a path through a weedy, desolate neighborhood with 20% unemployment and a 40% poverty rate. Its biggest claim to fame strolls past the gritty brick apartment buildings and tumbledown bungalows on a muggy morning in late June: Timothy Scott, a local product who grew up to become the first black Republican U.S. senator in more than three decades. Joining Scott is another success story: the frenetic, peripatetic tech billionaire Sean Parker, who flew in by private jet from Los Angeles’ ritzy Holmby Hills for a personal tour of the senator’s hometown.

“I remember so many kids with amazing potential who died on the vine,” Scott says as he surveys the shuttered Chicora Elementary School, where weeds climb the walls and graying plywood shields shattered windows. “The frustration, irritation and low expectations were so pervasive here that I always wanted to make a difference.”

He now may get his chance. Today’s visit is less a grim walk down memory lane than a legislative victory lap for Scott and Parker. The unlikely pair are core members of an even more unlikely group of conservatives and liberals, capitalists and philanthropists, U.S. lawmakers and small-town mayors who have successfully created one of the greatest tax-avoidance opportunities in American history, in the service of underperforming American cities and neighborhoods.

For all the focus on drastic tax-rate cuts, the fate of the state and local tax deduction and the exploding federal deficits, it’s the least-known part of last year’s tax-cut law that could be the most consequential. Officially called the Investing in Opportunity Act, it promises to pump a massive amount of cash into America’s most impoverished communities by offering wealthy investors and corporations a chance to erase their tax obligations.