Overview: Opportunity Zones Go Permanent
The One, Big, Beautiful Bill Act (OBBBA), enacted July 4, 2025, makes Qualified Opportunity Zones (QOZs) a permanent federal incentive, replacing prior sunset dates. Under OBBBA, states will nominate new census tracts every 10 years starting in 2027. (irs.gov)
Nomination Process & Rural Area Incentives
- Revenue Procedure 2026-14 outlines how state Chief Executive Officers nominate eligible census tracts effective January 1, 2027. Deadline windows begin July 1, 2026. (irs.gov)
- Census tracts comprised entirely of a rural area get more favorable “substantial improvement” tests. Instead of adding basis exceeding 100% of the property's adjusted basis, rural tracts only require exceeding 50%. (irs.gov)
Transitional Guidance & Anticipated Regulations
- Notice 2026-40 provides transitional guidance for investments under §§ 1400Z-1 and 1400Z-2 post-OBBBA amendments. It clarifies how prior rules (pre-OBBBA) will apply to certain investments for stock acquired on or before December 31, 2026. (irs.gov)
- Proposed regulations yet to be finalized include definitions like “applicable start date” for QOZ businesses, shape of holding period requirements, and whether certain past practices will be grandfathered. (irs.gov)
How to Assess Opportunity Zone Investments Now
- If you're investing in QOZ property acquired by Dec. 31, 2026, you may rely on the earlier definitions (e.g., the 2017 original-issue test) under transitional guidance. (irs.gov)
- For property in rural QOZs, expect the lower 50% improvement threshold to ease compliance costs. Great news for projects in underserved areas. (irs.gov)
- States: prepare to act during the nomination window starting July 1, 2026. Those who delay may miss block quotas (no more than 25% of LIC tracts per state may be designated under the OBBBA cycle). (irs.gov)
Example Scenario
A developer plans to build affordable housing in a tract that’s entirely rural. Suppose they acquire land on Oct 15, 2026, and start construction immediately with improve-ments. Under the new rural test, they need to invest only over 50% of the land’s adjusted basis to meet the substantial improvement requirement (rather than fully doubling it). They may also benefit from tax deferral and basis step-ups if investors hold QOF interest long enough.
Bottom line: Opportunity Zones are reshaping incentives under OBBBA. Active investors and state officials should understand the permanent extension, new rural area rules, and transitional guidance to plan strategically.