A provision slipped into last year's federal tax overhaul could unleash private money into some of the poorest corners of Minnesota, and communities across the state are vying for a piece of the action.

Cities, counties and tribes have been scrambling in recent weeks to nominate "Opportunity Zones" from Mahnomen to Minneapolis, hoping a tax break on investment income there will lure a flood of cash to build housing or start businesses.

But much remains unknown about the federal government's latest attempt to revitalize the country's poorest neighborhoods, including whether it will protect existing residents from displacement.

"I think it's got the opportunity to really reinvest in some of these older communities and bring a lot of vitality back," said Karen Skepper, director of community and government relations in Anoka County, which prioritized sites in Coon Rapids, Columbia Heights and the city of Anoka.

State officials are reviewing the proposals before recommending 128 census tracts to the federal government by April 20, out of the 509 low-income tracts that were eligible. Many local economic development professionals were taken by surprise after Congress quietly included the program in the tax bill, though it was derived from a bill that had drawn bipartisan support earlier in the year.

Now the zones are being submitted before the U.S. Treasury releases rules for the program, leaving some wondering what this new tax break for investors will mean for poor neighborhoods.

"Depending on how this is managed, it could be just a way for Wall Street investors to suck money out of low-income communities," said Brian Miller of Seward Redesign, a nonprofit developer. Miller hopes the rules are crafted to support smaller projects boosted by local investors.

Backers of the original bill included U.S. Sen. Cory Booker, D-N.J., who said it would "jump-start economic development and entrepreneurship by stimulating the flow of investment into the communities that need it most, from Camden to Newark and beyond."

The federal government has pursued other tax incentive programs in recent decades to attract investment to poor communities, including enterprise zones, empowerment zones and new market tax credits.

But the advocacy group behind the new program, called the Economic Innovation Group and chaired by Napster co-founder Sean Parker, argued in 2015 that the earlier efforts have had limited benefit because they are cumbersome and have not attracted enough investment. The Economic Innovation Group believes a tax break on investment earnings — capital gains — that are reinvested into Opportunity Zones could tap into a $6 trillion pool of profits parked in the stock market. So-called "opportunity funds" would raise money from multiple investors and have flexibility to invest it in a variety of ways within the zones.

If they remain invested for a certain period, investors would get a tax break on the profits they reinvested, as well as new profits they make within the zone.

This might entice someone in Chicago, for example, to sell shares in Microsoft and invest the profits into an opportunity fund, which then finances a new apartment building in Minneapolis' Phillips neighborhood.

After five years invested in the building, the investor would owe less tax on the sale of the stock. And after 10 years holding the building, the investor could sell it without owing capital gains taxes on the profit from the sale.

"It is a new ballgame, to a degree," said Andriana Abariotes, executive director of Twin Cities Local Initiatives Support Corp. (LISC), which raises and lends money to help finance developments in poor areas. Abariotes said her firm is "cautiously optimistic" since the program could attract investors who aren't currently involved in projects like affordable housing in low-income neighborhoods.

Uncertainty about the program led Minneapolis to focus its nominations on areas with substantial public ownership and some major development plans, said Shauen Pearce, the city's director of economic development and inclusion policy. That includes the Upper Harbor Terminal — the city's former port — the Nicollet Avenue Kmart site and the "Towerside" district near the University of Minnesota.

Miller, the developer, was part of a group that pushed successfully for the area around the Franklin Avenue light rail station to be included.

"We intentionally thought, 'OK, we don't want displacement,' " Pearce said. "So if an owner could come in and buy a block, that would be a risk because of what we see happen in Chicago, and in Atlanta, and in Seattle and in other places [where] someone buys a piece of property and then they decide to raise rent rates."

In the western Minnesota city of Pipestone, Economic Development Authority President Kevin Paulsen said there was already talk of developing a private equity group in the city, but more investors contacted him after hearing about Opportunity Zones. The city needs more housing and redevelopment of blighted properties, he said.

"I think it will make a difference. I think it will entice them to make those investments," said Paulsen, who is also the president of a local bank.

St. Paul developed a scoring process to identify its proposed zones, looking at income, unemployment, vacant buildings, and existing plans or designations. Many of its top choices are clustered near Interstate 94, including the Rondo area, and on the East Side.

"We were looking at it as, 'Where do we have large redevelopment project opportunities, where do we have manufacturing opportunity sites, our cultural corridors,' " said Deputy Mayor Jaime Tincher, citing as an example the potential redevelopment of the RiverCentre parking ramp.

The Opportunity Zones program has similarities to new market tax credits, a tax break established nearly two decades ago for investment in low-income areas. That recently helped build a new workforce center on West Broadway in north Minneapolis.

But Adam Looney, a senior fellow at the Washington, D.C.-based Brookings Institution, said the New Market program has a number of rules to protect local communities, such as funneling the money through designated community development organizations. Each project must also apply to the federal government for the money.

"They kind of rank the projects. And if you come in there saying I want to build luxury condos, you don't get picked," Looney said. "It's quite different from Opportunity Zones. Opportunity Zones — there are no rules."

Eric Roper • 612-673-1732 Twitter: @StribRoper