The One Big Beautiful Bill (OBBB) has revitalized, well, revitalization, with tweaks on Opportunity Zone incentives and a new focus on rural areas. Here’s what the State of Texas, IRS, and the Federal Ways & Means Committee have to say about the changes.
What Are Opportunity Zone Incentives?
The federal Opportunity Zone program was introduced as part of the 2017 tax reform as a way for taxpayers to temporarily defer income gains by investing corresponding amounts into certain development projects. These areas, also known as Qualified Opportunity Zones (QOZs), are located in state-designated economically distressed census tracts.
“Taxpayers who invest in QOZs receive certain tax benefits for their investments as an incentive to improve economic growth and job creation in these underserved communities,” the IRS explains.
The eligible gains that can be deferred include capital gains, but also qualified Section 1231 gains. Certain length-of-time and other requirements apply (and are summarized by the IRS here). If a QOZ fund is held for at least 10 years, the basis of the investment can be adjusted to its full fair market value when it’s sold or exchanged.
What Has Changed with Opportunity Zone Incentives?
When Opportunity Zones were first introduced, the incentives were set to expire by 2027, and distressed urban communities were the focus for many investors, with San Antonio second only to Houston for the number of Opportunity Zones available in the state.
The OBBB has made the program permanent along with other updates, including a new focus on small communities and rural areas.
“The updated framework emphasizes support for rural communities, tightens the income threshold for eligible tracts and removes the contiguous tract allowance,” the State of Texas explains. “Additional benefits, including enhanced capital gains exclusions and modified investment requirements, are designed to increase the flow of private capital into underserved areas.” Details are summarized here.
The eligibility map is currently being updated, with new tracts being proposed now by states and expected to be released by the U.S. Treasury this spring (2026). If you’re a real estate investor or developer, pay close attention and ask your tax advisor about the potential breaks these Opportunity Zone incentives could offer.
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