Opportunity Zones: Are They Still Worth It? A Look at the Permanent Renewal and Enhancement of the OZ Program

Opportunity Zones are a federal economic development tool created to encourage long-term investment in low-income communities nominated by state governments and certified by the U.S. Department of the Treasury. Established by Congress through the 2017 Tax Cuts and Jobs Act, the program offers tax incentives for reinvesting capital gains into Qualified Opportunity Funds.

Investments have exceeded $100 billion since the program’s official launch, channeling capital into thousands of underserved communities across the U.S. Despite this influx of funding, Opportunity Zones’ long-term impact remains a topic of debate. While the program has generated billions in unrealized gains, questions persist about how much value it delivers to the communities it aims to uplift — and whether the risk-reward ratio is favorable for investors.

Advantages of Opportunity Zones

Unlike empowerment zones, which benefit investors with income tax credits and deductions, Opportunity Zones provide capital gains tax breaks. These make investing much more attractive by allowing investors to defer, reduce or eliminate their tax payments on related profits.  

Eight years in, 2025 has brought significant changes to Opportunity Zone regulations and reporting requirements. With further updates potentially on the horizon, investors face growing pressure to understand how these shifts affect their tax exposure, compliance obligations and investment strategy.

The Impact of the One Big Beautiful Bill Act on Opportunity Zones

On July 4, 2025, President Trump signed Public Law 119-21, otherwise known as the One Big Beautiful Bill Act.

Among other things, this law made permanent changes to the Opportunity Zone program by extending it indefinitely, incorporating new investment requirements and introducing noncompliance penalties. 

• Permanent renewal: Though the Opportunity Zone program was originally supposed to expire on Dec. 31, 2026, Trump’s signing of the OBBBA into law made it a permanent feature of the tax code, with zones that rotate every 10 years. 
• Eligibility changes: The OBBBA has restricted Opportunity Zone qualifications. An eligible census tract must now have a poverty rate of at least 20%, with a median family income that does not exceed 125% of either the metropolitan area’s or the statewide median family income. 

Modified Tax Benefits

The OBBBA changed three existing TCJA rules, applicable to investments made after Dec. 31, 2026.

The new tax benefits are now as follows:

• The tax deferral period exists on a rolling five-year basis after the initial investment into the OZ.
• Aside from qualifying rural opportunity fund investments, there is no longer an additional 5% basis held for investments of seven years or more. However, a 10% basis increase still applies to investments of five years or more.
• Tax-free growth ends 30 years after the date of your initial investment.

Increased Reporting Requirements and Penalties

Reporting standards are now more thorough for new and existing investments into QOFs. In addition to the existing requirements, QOFs must now also report:

• The name and address of any held OZ interest.
• The approximate number of residential units for real estate and property investment.
• Clear indications of the impact of OZ investment on employment, such as the number of full-time employees.

A New Program: Rural Opportunity Funds

The creation of Qualified Rural Opportunity Funds is one of the most notable updates introduced by the OBBBA. These specialized funds offer enhanced tax incentives for investors who direct capital into designated rural areas.

Unlike standard Qualified Opportunity Funds, QROFs provide a significantly larger basis step-up — 30% after five years, which is roughly triple the benefit available through traditional QOFs. This advantage makes them especially attractive for long-term investors focused on rural development.

To clarify eligibility, the Department of the Treasury and the IRS have defined a rural zone as any area outside a city or town with a population over 50,000, including any urbanized area that borders such a city or town.

What Are the Downsides of Opportunity Zones?

Though the OBBBA has ushered in promising incentives and investment opportunities, it has also created new challenges for investors.

• Uncertainty: The most profound downside of the OZ 2027 is the uncertainty that the transition period will bring. The investment landscape may become more complex as we transition from the TCJA OZ to OZ 2027.
• A more selective approach: Stricter eligibility requirements will make it harder for investors to find and invest in eligible zones.
• Reduced upside for non-rural zones: With the elimination of the additional 5% basis, non-rural QOFs will have a less generous path to step-ups, and some investors may experience shorter holding periods. 
• Stricter reporting: The more thorough nature of the OZ 2027 reporting requirements increases complexity for QOFs and will require filing an annual tax return.
• Higher administrative burden: While additional reporting benefits Congress and the IRS, it will force investors to shoulder extra compliance costs and administrative burdens. 
• Timing and exit risk: Investors may have to hold their investments for over 10 years to fully benefit from the program’s tax gains, which may limit their exit options and increase the risk of depreciation. 

Relieve Your Financial Burdens With Polston Tax Resolution & Accounting

The Polston Tax team has over a century of combined experience in providing tax relief and comprehensive accounting services. Our full-service firm demystifies back taxes, bank levies and tax preparation across a diverse array of industries. 

When you partner with Polston Tax, you become part of our family, with over 100 finance professionals on your side. We’re here to help if you need expert guidance on recent Opportunity Zone program changes or want to better understand the tax implications. Schedule your free consultation and request personalized support for your investment strategy.