OZ 2.0: What the One Big Beautiful Bill Changed

The Opportunity Zone program was made permanent by the One Big Beautiful Bill Act, signed into law on July 4, 2025. Here's everything investors, developers, and lenders need to know about what changed.

OZ 1.0 dates and deadlines

Current Opportunity Zones (OZ 1.0) remain designated through December 31, 2028. That date is not an investment deadline. Under IRS Notice 2026-40, interim guidance issued June 18, 2026, property acquired after December 31, 2026 in a zone that is not redesignated under OZ 2.0 generally will not qualify, with limited exceptions for projects covered by a working capital safe harbor plan adopted before 2027 and for ordinary-course replacement property. New investments starting in 2027 should generally look to OZ 2.0 zones.

Capital gains invested in a Qualified Opportunity Fund by December 31, 2026 are deferred only until December 31, 2026. The 10% and 15% basis increases from the original program are no longer available to new investors, because they required investments made by December 31, 2021 and December 31, 2019. The benefit that remains is the 10-year rule: if the investment is held at least 10 years, appreciation on it can be excluded from federal tax, with December 31, 2047 as the final date to sell and still elect that treatment.

How OZ 2.0 works

For investments made on or after January 1, 2027, deferred gain is recognized at the earlier of selling the investment or five years after investing. Investments held five years receive a 10% basis increase, or 30% when made through a Qualified Rural Opportunity Fund. Investments held at least 10 years can exclude appreciation. For property in rural Opportunity Zones, the substantial improvement threshold is 50% of basis instead of 100%, effective July 4, 2025. OZ 2.0 zones are designated for 10 years, January 1, 2027 through December 31, 2036, with new designations every 10 years.

Key dates

Where OZ 2.0 designations stand

Governors may designate up to 25% of their state's eligible tracts, or up to 25 tracts in states with fewer than 100 eligible tracts. Nationally, 25,332 tracts were eligible. On November 5, 2026, Treasury and the IRS published the final list: 6,576 tracts designated, including 2,594 rural, fewer than the 8,764 zones in place today. The new zones take effect January 1, 2027. Read our explainer of the official list.

Enhanced Reporting Requirements

The Act added new annual reporting duties for Qualified Opportunity Funds and the businesses they invest in, effective July 4, 2025, so they apply to current funds starting with tax year 2026. Reports must include:

• Asset values, including the value of qualified opportunity zone property
• Whether business property is owned or leased, and its value
• The census tract and industry classification (NAICS code) of each business
• The approximate number of residential units in any real property held
• The number of full-time employees
• Information about fund investors and dispositions

Penalties apply for failing to report. Treasury will use the data to publish annual and five-year Opportunity Zone impact reports. In September 2026, Treasury proposed regulations that would make Form 8996 a standalone annual information return and require businesses to furnish annual statements to the funds invested in them. These rules are proposed, not final.

New Eligibility Criteria

For new OZ designations starting in 2027, the eligibility criteria has been tightened: census tracts must have median family income below 70% of the area median (previously 80%). This ensures the program targets the most economically distressed communities.