The OBBB Act’s Impact on Opportunity Zones: Permanent Extension & Key Changes

The One Big Beautiful Bill (OBBB) Act was enacted earlier this month, making many provisions permanent from the Tax Cuts and Jobs Act of 2017 (TCJA). We’ve previously written about how the OBBBA impacts businesses and individuals, and in this article, we take a closer look at the Opportunity Zone (OZ) program—which has now been permanently extended, though with some modifications from its original version under the TCJA.

What’s Staying the Same?
To set the stage: the original OZ program, created under the TCJA, remains in effect for capital gains invested into qualified opportunity zone funds (QOFs) through December 31, 2026. The timelines and tax benefits previously outlined are still applicable to these investments. This article focuses on the changes to the OZ program going forward under the OBBBA.

New OZ Designations Every 10 Years
Arguably the most impactful change in the OBBBA is the removal of the December 31, 2026, final deadline to invest capital gains into a QOF. Under the new law, the OZ program is now permanent, allowing for continued investment incentives in designated low-income communities.

To ensure the program remains aligned with its original intent, OBBBA introduces a decennial (every 10 years) review process. The first re-evaluation date is set for July 1, 2026. New OZ tracts designated at that time will be effective from January 1, 2027, through December 31, 2036, with the next review slated for July 2036. Notably, the income requirements for designation are now more stringent, meaning there will likely be fewer eligible tracts beginning in 2027.

Gain Inclusion Timeline Adjusted
Under the current OZ program, capital gains deferred into a QOF must be recognized on December 31, 2026 (unless an earlier triggering event occurs). Previous rules also included 10% and 15% basis step-ups for early investors who contributed gains by the end of 2021 and 2019, respectively.

With the OZ program now permanent, the concept of a single inclusion date no longer works. Instead, the OBBBA introduces a rolling five-year deferral: capital gains invested into a QOF will be included in taxable income five years after the date of investment. This timeline also makes investors eligible for the 10% basis adjustment, as long as no early triggering event occurs.

Additional Benefits for Rural OZ Tracts
The OBBBA also introduces a new class of QOFs for investments in designated rural opportunity zones. These Rural QOFs operate similarly to standard QOFs but with two key differences:

• Enhanced Basis Adjustment: Investors receive a 30% basis increase after the five-year deferral period.
• Reduced Improvement Threshold: QOZBs in rural areas only need to substantially improve property by 50% of its adjusted basis, compared to the 100% requirement for traditional QOFs.

New Disclosure Requirements Coming
The original OZ program faced criticism for two main reasons:

• Overly broad tract designations, including high-income urban areas.
• Lack of transparency and reporting in the self-certification process.

The OBBBA addresses both concerns. As mentioned, new OZ tract designations will follow stricter income criteria. Additionally, QOFs with taxable years beginning after July 4, 2026, will be required to report details such as investment type, location, and number of full-time equivalent employees. This will enable the federal government to better track the program’s economic impact.

Looking Ahead
The permanent extension of the OZ program is a major win for the real estate and investment community. While many of the core rules remain, they continue to be complex and require strategic navigation.

Trent Baeckl is Shareholder at Perkins & Co., Portland, where he specializes in their Real Estate Practice Group. He joined the firm's tax department in 2007. This article is reprinted with permission.