{{Short description|American designation and investment program}} An '''opportunity zone''' is a designation and investment program created by the Tax Cuts and Jobs Act of 2017 allowing for certain investments in lower income areas to have tax advantages. The program allows investors to defer capital gains taxes by reinvesting those gains into Qualified Opportunity Funds (QOFs) that develop or operate within these zones. If held for at least 10 years, any appreciation on the QOF investment becomes entirely tax-free.

Designed to unlock idle capital and drive economic revitalization, over 8,700 zones<ref>{{Cite web |last= |first= |title=What is a Qualified Opportunity Zone? |url=https://www.qof.com/p/what-is-a-qualified-opportunity-zone |access-date=2025-10-08 |website=www.qof.com |language=en}}</ref><ref name=":0">{{Cite news |last=Sullivan |first=Paul |date=2019-05-17 |title=Is an Opportunity Zone the Right Investment for You? |url=https://www.nytimes.com/2019/05/17/your-money/opportunity-zone-investment.html |access-date=2026-04-21 |work=The New York Times |language=en-US |issn=0362-4331}}</ref> were designated across the U.S. While the program has successfully attracted billions in capital, it continues to evolve amid discussions about transparency, impact tracking, and equitable outcomes.<ref name=":0" />

==History== Opportunity Zones were proposed by Senators Tim Scott, Cory Booker, and Representatives Ron Kind, Pat Tiberi<ref>{{Cite web|url=https://www.booker.senate.gov/?p=press_release&id=1011 |title=Booker, Wyden, Lewis, Neal Request GAO Study on Opportunity Zones {{!}} Cory Booker {{!}} U.S. Senator for New Jersey|website=www.booker.senate.gov|access-date=2020-02-06}}</ref> and supported by Sean Parker's Economic Innovation Group.<ref name="NYT20180129">Tankersley, Jim (January 29, 2018). "[https://www.nytimes.com/2018/01/29/business/tax-bill-economic-recovery-opportunity-zones.html Tucked Into the Tax Bill, a Plan to Help Distressed America]". ''The New York Times''. Retrieved December 3, 2018.</ref> States may designate up to 25% of low-income census tracts as Opportunity Zones.<ref name="NYT20180129" /> Opportunity Zones were created under the 2017 Tax Cuts and Jobs Act, signed into law by President Donald Trump.<ref>{{Cite web |title=Executive Order on Establishing the White House Opportunity and Revitalization Council – The White House |url=https://trumpwhitehouse.archives.gov/presidential-actions/executive-order-establishing-white-house-opportunity-revitalization-council/ |access-date=2026-04-21 |website=trumpwhitehouse.archives.gov}}</ref>

The first Opportunity Zones were designated in April 2018.<ref>"[https://home.treasury.gov/news/press-releases/sm0341 Treasury, IRS Announce First Round Of Opportunity Zones Designations For 18 States]". ''U.S. Department of the Treasury''. April 9, 2018. Retrieved December 3, 2018.</ref> There are 8,764 Opportunity Zones in the 50 states, and five U.S. possessions, including American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands.<ref name="OZlocations">{{cite web |title=Opportunity Zones by Location |url=https://opportunityzones.com/location/ |website=OpportunityZones.com |access-date=24 September 2024 |ref=OZlocations}}</ref>

Not all Opportunity Zones are in low income communities. Per Internal Revenue Code Section 1400Z-1(e), up to five percent of the Opportunity Zones in each state can be non-low income tracts contiguous to low-income tracts.<ref name="1400z-1">{{cite web |title=U.S. Code Title 26 Subtitle A CHAPTER 1 Subchapter Z § 1400Z–1 - Designation |url=https://www.law.cornell.edu/uscode/text/26/1400Z-1 |website=Legal Information Institute |publisher=Cornell Law School |access-date=25 January 2024 |ref=1400z-1}}</ref> In December 2019, Treasury issued final regulatory guidance on Qualified Opportunity Fund investing.<ref name="finalregs">{{cite news |last1=Atkinson |first1=Jimmy |title=IRS Issues Final Regulations on Opportunity Zones |url=https://opportunityzones.com/2019/12/irs-issues-final-regulations-on-opportunity-zones/ |access-date=24 September 2024 |publisher=OpportunityZones.com |date=December 19, 2019}}</ref>

Opportunity Zones 1.0 (OZ 1.0) has facilitated approximately $100 billion in investment, contributed to the creation of around 400,000 housing units, and supported roughly half a million jobs.<ref>{{Cite web |date=2026-04-19 |title=HUD secretary visits Fort Lauderdale to pitch updated Opportunity Zone program |url=https://www.sun-sentinel.com/2026/04/19/hud-secretary-visits-fort-lauderdale-to-pitch-updated-opportunity-zone-program/ |access-date=2026-04-21 |website=Sun Sentinel |language=en-US}}</ref> Under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, the Opportunity Zone program was updated to Opportunity Zones 2.0 (OZ 2.0), which will become effective on January 1, 2027.<ref>{{Cite web |title=Federal Opportunity Zones in Texas |url=https://gov.texas.gov/business/page/opportunity-zones |access-date=2026-04-21 |website=gov.texas.gov |language=en}}</ref><ref name=":1">{{Cite web |last=report |first=Staff |date=2026-04-15 |title=Scott highlights Opportunity Zones expansion |url=https://www.postandcourier.com/kingstree/community-news/scott-highlights-opportunity-zones-expansion/article_0b52521b-99a7-4db9-8a39-6b66eaf96bf2.html |access-date=2026-04-21 |website=Post and Courier |language=en}}</ref> The program was made permanent and revised to enhance its long-term economic impact. The updates introduced additional reporting requirements aimed at improving transparency and accountability, alongside revised eligibility criteria for designated zones.<ref name=":1" />

On April 1, 2026, the U.S. Department of the Treasury published the final nomination framework for OZ 2.0.<ref>{{Cite web |date=2026-02-13 |title=New Guidance Unlocks Economic Opportunity for Overlooked Communities |url=https://home.treasury.gov/news/press-releases/sb0436 |access-date=2026-04-21 |website=U.S. Department of the Treasury |language=en}}</ref> The framework established a 90-day nomination window beginning on July 1, 2026, during which state governors may nominate up to 25% of eligible census tracts. It also eliminated the contiguous tract designation option, tightened the median family income eligibility threshold from 80% to 70%, and removed the provision allowing blanket designation of all census tracts in Puerto Rico.<ref>{{Cite web |title=Opportunity Zone News — OZ 2.0 updates, legislation, and state filings |url=https://opportunityzoneinvest.com/news/ |access-date=2026-04-21 |website=Opportunity Zone Invest |language=en}}</ref>

==Requirements== To qualify, the Opportunity Fund must invest more than 90% of its assets in a Qualified Opportunity Zone Property located in an Opportunity Zone.<ref name= crain/> The property must be original use, or meet the definition of substantial improvement, meaning that the adjusted basis in the property must be doubled after purchase.<ref>Baker, Matt (November 28, 2018). "[https://www.rejournals.com/the-legal-loopholes-of-opportunity-zones-20181128 The legal loopholes of Opportunity Zones]". ''RE journals''.</ref> Capital gain taxes are deferred for investments reinvested into investments in these zones and, if the investment is held for ten years, all capital gains on the new investment are waived. Despite the tax benefits and broad bipartisan support,<ref name="kiplinger">{{cite news |last1=Goodman |first1=Daniel |title=Opportunity Zones in 2023: A Look Back, a Look Forward |url=https://www.kiplinger.com/real-estate/opportunity-zones-a-look-back-a-look-forward |access-date=25 January 2024 |publisher=Kiplinger |date=February 28, 2023 |ref=kiplinger}}</ref> the Opportunity Zones policy has its critics.<ref name="NYT20180129" /> Opportunity Zones are census tracts nominated by state authorities and certified by the IRS. A total of 8,764 census tracts have been so designated.<ref name=bloomberg>{{cite news |author=Lydia O'Neal |date=18 April 2019 |title=Cottage Industry in Opportunity Zone Data Forms to Fill Vacuum (1) |url=https://news.bloombergtax.com/daily-tax-report/cottage-industry-in-opportunity-zone-data-forms-to-fill-vacuum |work= Bloomberg |access-date=18 April 2019 }}</ref>

An investor who triggers an eligible gain (including capital gains and qualified 1231 gains) may reinvest the capital gain in a Qualified Opportunity Fund within 180 days in order to receive Opportunity Zone tax benefits.<ref name= crain>Grassi, Carl (December 1, 2018). "[https://www.crainscleveland.com/small-business/tax-tips-opportunity-zone-program-offers-investors-deferred-gain-tax-benefits Opportunity Zone program offers investors deferred gain tax benefits]". ''Crain's Cleveland Business''.</ref>

=== Eligibility under OZ 2.0 === To qualify as an eligible tract under OZ 2.0, a census tract must meet the following criteria:<ref>{{Cite web |title=New tax law reinvents TCJA's Opportunity Zones as new, permanent program, beginning in 2027 |url=https://taxnews.ey.com/news/2025-1418-new-tax-law-reinvents-tcjas-opportunity-zones-as-new-permanent-program-beginning-in-2027}}</ref>

* Median family income below 70% of the applicable area median. * No longer includes the contiguous-tract provision that allowed non-low-income tracts to qualify under OZ 1.0. * Excludes the U.S. territories previously covered under the original program's blanket eligibility, including Puerto Rico, the U.S. Virgin Islands, and American Samoa.

Revenue Procedure 2026-14 identified 25,332 census tracts as eligible for OZ 2.0 designation, of which 8,334 are classified as entirely rural tracts.

==Tax benefits== There are four major tax benefits available to U.S. taxpayers who timely reinvest eligible gains into Qualified Opportunity Funds that comply with the Opportunity Zone statute and IRS regulatory guidance.<ref name="taxbenefits">{{cite web |last1=Atkinson |first1=Jimmy |title=Opportunity Zone Tax Benefits: Unlimited Tax-Free Growth |url=https://opportunityzones.com/guide/tax-savings/ |website=OpportunityZones.com |access-date=24 September 2024 |ref=taxbenefits}}</ref>

# For tax reporting purposes, the eligible gain is deferred until December 31, 2026. # The tax liability on the reinvested eligible gains is reduced through a basis step-up of either 10 or 15 percent. Note: The 15% benefit expired after December 31, 2019. The 10% benefit expired after December 31, 2021. Investments in QOFs made after December 31, 2021, no longer receive this benefit. # The tax liability resulting from the sale of the Qualified Opportunity Fund is eliminated, through a step-up to fair market value upon disposition, so long as the Qualified Opportunity Fund has been held for a period of at least 10 years. # There is no depreciation recapture upon the sale of depreciated Qualified Opportunity Zone Property.

In order to report the investment to the IRS, the taxpayer needs to file IRS Form 8997 annually.<ref name="form8997">{{cite web |title=About Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments |url=https://www.irs.gov/forms-pubs/about-form-8997 |website=IRS.gov |publisher=Internal Revenue Service |access-date=25 January 2024 |ref=form8997}}</ref>

Prior to the law creating Opportunity Zones, an investor could defer capital gains taxes only through a like-kind exchange, i.e., by trading one asset for another asset in the same asset class by using a Section 1031 exchange.<ref name="arixa">{{cite web |last1=Brezski |first1=Jan |title=Opportunity Zone Investment vs 1031 Exchanges |url=https://www.arixacapital.com/opportunity-zone-investment-vs-1031-exchange |url-status=dead |archive-url=https://web.archive.org/web/20201112002429/https://www.arixacapital.com/opportunity-zone-investment-vs-1031-exchange/ |archive-date=12 November 2020 |accessdate=15 January 2019 |website=arixacapital.com/}}</ref><ref name= borland>Borland, Kelsi Maree (November 27, 2018). "[https://www.globest.com/2018/11/27/how-popular-will-opportunity-zones-be/?slreturn=20181103215201 How Popular Will Opportunity Zones Be?]". ''GlobeSt''. ALM Media Properties, LLC.</ref> Opportunity Zones are similar, but there are several key differences.<ref name="ozs1031s">{{cite web |last1=Atkinson |first1=Jimmy |title=Opportunity Zones vs. 1031 Exchanges |url=https://opportunityzones.com/guide/oz-vs-1031/ |website=OpportunityZones.com |access-date=24 September 2024 |ref=ozs1031s}}</ref> One such difference is that an Opportunity Zone does not require a like-kind exchange. Instead, by investing in a Qualified Opportunity Fund, an investor can defer any eligible gain (either capital gains or qualified 1231 gains) arising from the transaction of a property in any asset class (e.g., stocks, privately held business, real estate, collectibles, etc.).<ref name= arixa/><ref name= borland/>

==See also== * Keystone Opportunity Zone * Empowerment zone * Urban renewal * Gentrification * Special economic zone

==References== {{reflist}}

==External links== * {{URL|https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx|CDFI Fund - Opportunity Zones Resources}} * {{URL|https://eig.org/opportunityzones|Economic Innovation Group - Opportunity Zones}} * {{URL|https://opportunityzones.com/guide/|OpportunityZones.com - Opportunity Zones Explained: The Beginner's Guide To OZs}} * {{URL|https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions|IRS - Opportunity Zones Frequently Asked Questions}} * {{URL|https://www.novoco.com/resource-centers/opportunity-zones-resource-center|Novogradac - Opportunity Zones Resource Center}} * {{URL|https://ozframework.org/|OZ Framework - An impact measurement framework for Opportunity Zones}} * {{URL|https://opportunityzones.hud.gov/thecouncil|The White House Opportunity and Revitalization Council}} * [https://www.qof.com QOF - Qualified Opportunity Fund]

Category:Special economic zones of the United States Category:United States tax law Category:First presidency of Donald Trump