OBBB opportunity zone updates signal major change in 2026
The opportunity zones incentive, as part of the OBBB tax provisions, provides significant tax advantages to investors who reinvest capital gains into qualifying funds.
Starting in 2026, the OBBB opportunity zone updates are changing reporting, designations and potential benefits for investors. Here’s our overview of seven key items included in the OBBB:
1. Trump’s opportunity zones update
The opportunity zone program will now be a permanent part of the tax code. Under previous law the program was set to expire for the reinvestment of capital gains that occurred after December 31, 2026.
2. New opportunity zone deferral mechanism
Under prior law, investors had to recognize any gain deferred into the qualified opportunity fund (QOF) on the earlier date between the date on which the QOF investment was sold or exchanged or December 31, 2026.
Now, capital gains invested in opportunity zones after December 31, 2026, will be eligible for deferral on a five-year rolling basis, including a 10% step-up on a basis held for the entire five-year period for non-rural QOFs. The new rolling deferral mechanism offers greater flexibility and simplifies tax planning, helping encourage long-term investment in opportunity zone projects.
3. New opportunity zone tract designation criteria
The OBBB includes stricter opportunity zone tract designation criteria. The eligibility threshold for opportunity zone tracts under OBBB has been lowered to 70% down from the previous 80%.
A “low-income community” is defined as any population census tract that meets specific income or poverty criteria. First, it qualifies if the median family income in the tract does not exceed 70% of the median family income for the state (if the tract is outside a metropolitan area) or 70% for the metropolitan area (if the tract is within one).
Alternatively, a tract may also qualify if it has a poverty rate of at least 20% and a median family income that does not exceed 125% of the statewide median (for non-metropolitan areas) or 125% of the metropolitan median (for metropolitan areas). These criteria are established to identify economically disadvantaged areas eligible for certain federal programs and incentives.
4. Enhanced opportunity zone reporting requirements
Both QOFs and qualified opportunity zone businesses (QOZBs) are subject to additional reporting obligations.
QOFs and QOZBs now have enhanced reporting requirements to the IRS, including information on asset values, business locations, employee counts and investment amounts by census tract.
Additionally, the IRS will publish annual public summaries that track investment flows, job creation and housing development across opportunity zone tracts.
5. New provisions for rural areas:
Investments where at least 90% of qualified opportunity zone property is located in a rural area (as defined by the USDA) will benefit from a 30% step-up in basis after the five-year rolling period. These will be defined as qualified rural opportunity funds.
Furthermore, the substantial improvement requirement for existing buildings in these areas is reduced to 50%, compared to the standard 100%.
6. Opportunity zone gain elimination after 30 years
The OBBB introduces a rolling 30-year window for gain elimination.
For investments sold or exchanged after 10 and before 30 years, the step-up in basis will reflect fair market value at the date of sale. If sold 30 or more years after investment, the fair market value will be “frozen” as of the 30th anniversary date.
7. New opportunity zones tracts
Starting July 1, 2026, state governors will propose new census tracts for opportunity zone designation every 10 years, with certification by the U.S. Treasury. The first set of new zones will take effect on January 1, 2027, and each designated tract will retain its status for a full decade, providing a stable window for investment and development.
How Wipfli can help
Ready to turn policy changes into a strategic advantage? Wipfli’s opportunity zone services can help you navigate the new OBBB tax landscape and unlock long-term value. Reach out today to talk to our experienced team about the future of your opportunity zone investments.
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Explore the latest OBBB news on our policy updates page, or get more insights with these additional resources:
