Opportunity Zones initiate economic growth and job creation in low-income communities by using tax breaks to incentivize investment.
Originally created by the 2017 Tax Cuts and Jobs Act (TCJA), the Opportunity Zones program was recently modified by the One Big Beautiful Bill Act (OBBBA) in ways that lawyers advising real estate professionals and investors should keep in mind. This article provides a sampling of those changes, after providing a basic overview of the program.
Overview of the Opportunity Zone Program
At its core, the program permits investors with unrealized gains to defer capital gains tax, to the extent they invested within eligible census tracts designated by the governor. Those tracts are known as “Opportunity Zones.”
Profits from the investments in Opportunity Zones may be exempt from capital gains in the event the funds invested remained invested for ten years. In designating Opportunity Zones, governors select up to 25% of eligible census tracts. Median income and poverty levels determine eligible tracts.
Recent Changes to Opportunity Zones
Many changes to the program will occur because of the OBBBA, with many details being fleshed out through regulations. Key changes to be aware of include the following:
James Wawrzyn, Marquette 2006, is a senior corporate attorney with Forest County Potawatomi, Milwaukee.
The program becomes permanent. When initially created, the program was set to sunset in 2028. New investments would not have been permitted after Dec. 31, 2026. The OBBBA makes the program permanent. Now, for investments after Dec. 31, 2026, deferred gains will be recognized on the fifth anniversary of the investment. The OBBBA makes permanent a 10% basis step-up.
Rural focused opportunity funds. The OBBBA created a new category of funds to facilitate investments in rural areas, defined as “Qualified Rural Opportunity Funds.” Investment through a Qualified Rural Opportunity Fund has enhanced tax benefits compared to other Opportunity Zones, including a rolling 30% basis step up after five years and a reduced substantial improvement requirement that provides only 50% of adjusted basis needs to be reinvested in improvements.
There will be more data on utilization of the program. To date, it appears that over $100 billion have been invested in Opportunity Zones, with 75% of that being invested in real estate.[1] Most of the investment has been in residential real estate, versus job-creating investment in operating businesses. Data is not as readily available because the TCJA did not include a reporting requirement. However, the OBBBA requires the Secretary of the Department of Treasury to annually prepare a report on Opportunity Zones, including amounts invested and employment opportunities created.
Keep an eye out for the new maps. The OBBBA will result in a change in the maps of the Opportunity Zones as of January 2027. The new Opportunity Zones will last for 10 years. Governors will designate new zones every 10 years, subject to approval by the Secretary of the Department of Treasury. Zones will generally need to be 70% of the area or statewide median income, which is a lower threshold than established in the TCJA. The OBBBA also eliminated the ability of Governors to designate areas contiguous to otherwise eligible tracts as Opportunity Zones.
Full implementation of the OBBBA will take time, so ongoing monitoring of the program will be worthwhile for many advisors to real estate professionals and investors.
This article was originally published on the State Bar of Wisconsin’s Business Law Blog. Visit the State Bar sections or the Business Law Section webpages to learn more about the benefits of section membership.
Endnote
[1] David Wessel, “How Did the One Big Beautiful Bill Act Change Opportunity Zones?,”
The Brookings Institution, July 8, 2025.
↩
