Opportunity Zones are low income communities nominated by state governors for special tax benefits designed to spur economic growth and real estate development. Recent changes to the opportunity zones program under the One Big Beautiful Bill Act, effective January 1, 2027, make the Opportunity Zones program permanent, change the parameters of the program, and offer special new opportunities for rural areas.
Under the original program, taxpayers were able to defer, reduce, or eliminate federal capital gains tax liability by investing qualifying gains into Qualified Opportunity Funds. These benefits—including deferral until December 31, 2026—were governed by U.S. Treasury Regulations issued in 2019.
As part of the 2025 legislative changes, Congress created a new, permanent Opportunity Zones program that will begin on January 1, 2027.
Under this “OZ 2.0” structure:
- All existing Opportunity Zones remain in effect through December 31, 2026, and investors may continue to use the original tax benefits for qualifying investments made before that date.
- Beginning January 1, 2027, a new set of Opportunity Zone census tract designations will take effect following a new nomination process. These zones will operate on 10 year designation cycles. The process for nomination of new opportunity zones began on July 1, 2026.
The new legislation revised the criteria for designation of opportunity zones, generally tightening the qualification requirements, but relaxing the requirements for rural areas. Prior rules allowing for designation of census tracts as opportunity zones if they are continuous with low-income areas, but are not low income, have been repealed.
For investments made after December 31, 2026, the benefits of the program have changed. Under the new program, taxpayers receive the following benefits:
- Gain Deferral. Taxpayers may defer eligible capital gains on the sale of their original investment until the earlier of five years or when the investment is sold. This replaces the deferral approach under the original legislation, where deferral generally lasted until December 31, 2026. The process for computation of the includable gain has also changed.
- Basis Step Up. Taxpayers receive a basis step up in their original investment, which serves to offset some of the deferred gain. The amount of the basis step up is 10% for most investments, with 30% applying for opportunity funds focused on rural areas (which also have relaxed rules for property improvements). The basis step up applies after five years of holding the opportunity fund investment. This replaces a prior regime where which had two basis step up events, up to a total of 15%.
- Gain Exclusion. If an investment is held more than 10 years, but less than 30 years, gain on sale of the investment is excluded from income when the investment is sold. At the 30 year anniversary, if the investment is not sold, the investment receives a basis equal to the investment’s then fair market value. This is the most powerful incentive under the law, as it eliminates gain on sale. These new rules replace prior gain exclusion which effectively eliminated benefits if the investment was held over 30 years.
The new rules also change and enhance the information reporting requirements for opportunity zones (and add penalties for compliance failures).
The rebooted Opportunity Zones program is flexible and powerful economic development tool. Eligible investors include individuals, C corporations, partnerships, and S corporations. Opportunity Zone investments may also be layered with other incentives such as historic tax credits, low income housing tax credits, and brownfield tax credits.
How We Can Help You Navigate a Changing Opportunity Zones Landscape
Opportunity Zone transactions can be highly complex. They often involve unique deal structures, compliance challenges, and highly-specific rules. Successfully participating in both the existing and forthcoming Opportunity Zone frameworks requires multidisciplinary knowledge and the ability to anticipate evolving regulatory requirements.
The Harter Secrest & Emery Opportunity Zones team brings together attorneys from our Tax, Real Estate, Environmental, Land Use and Energy, and Corporate practice groups. Working collaboratively, we advise investors, developers, and property owners on all aspects of Opportunity Zone participation, including:
- Identifying Qualified Opportunity Zone investments
- Investing in existing Qualified Opportunity Funds
- Forming new Qualified Opportunity Funds
- Purchasing and selling Qualified Opportunity Zone property
- Securing additional financing for Opportunity Zone projects
- Conducting due diligence and managing land use and environmental approvals
Our Real Estate and Corporate teams also provide day‑to‑day counsel to clients on the management and ongoing operations of Qualified Opportunity Zone businesses and properties.
As the Opportunity Zones program transitions to its next phase in 2027, our attorneys are prepared to guide clients through both the existing rules and the new permanent framework to maximize tax benefits and meet project objectives.
Our Clients
- Banks
- Developers
- Real Estate Investors
- Real Estate Investment Trusts
- Venture Capital and Private Equity Funds
Key Contacts
Team
According to our clients:
“It has been a refreshing change to work with the attorneys at Harter Secrest & Emery. When I present situations that may not be in my primary attorney's field of expertise, they are quick to offer a very well-qualified associate within the firm who follows up with me very quickly and professionally.”
“They really look to the best interest of their clients and how to meet their clients’ needs.”