Created as part of the Tax Cuts and Jobs Act, Opportunity Zones are a federal economic development tool aiming to improve the outcomes of distressed communities around the country. Opportunity Zones are low-income census tracts that offer tax incentives to groups who invest and hold their capital gains in Zone assets or property. By investing in Opportunity Zones, investors stand to gain a temporary deferral on their capital gains taxes if they hold their investments for at least 5 years, and a permanent exclusion from a tax on capital gains from the Opportunity Zones investments if the investments are held for 10 years.
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Interested in learning more about Opportunity Zones? This section will help you understand the basics.
Learn more about Opportunity Zones
, created as a result of the passage of the Tax Cuts and Jobs Act, are low-income census tracts eligible to use tax incentives to encourage long-term investments in Zone assets and property. Opportunity Zones are designated as such by the governor or chief executive of a given state, district, or territory. All 50 states, the District of Columbia, and U.S. territories are eligible to designate Opportunity Zones.
Opportunity Zones must be created within "low-income communities," as defined by Section 45D(e) of the Internal Revenue Code (the New Markets Tax Credits Program uses the same definition). In Section 45D(e), "low income communities" are any census tract that have a poverty rate of at least 20 percent, or the median family income does not exceed 80 percent of statewide median family income. If in a metropolitan area, the median family area for such tract must not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.
As of December 22, 2017, state governors or territory chief executives had 90 days to designate their state or territories' Opportunity Zones. A maximum of 25 percent of a state or territories' low-income census tracts may be designated as Opportunity Zones. If a given state or territory has less than 100 low-income census tracts, it may still designate 25 state Opportunity Zones.
Tax Benefits to Investing in Opportunity Zones
For an investor to realize the tax benefits of investing in Opportunity Zones, an investor's capital gains must be invested in a Qualified Opportunity Fund with 180 days of the sale or exchange that generated the gains. Investors are then eligible to defer the tax on their capital gains until the earlier of: the date the Opportunity Fund investment is sold or December 31, 2026.
The capital gains invested in a Qualified Opportunity Fund are eligible for partial tax forgiveness if the investment is held in a Qualified Opportunity Fund for at least 5 years. After 5 years, only 90 percent of the original gain is taxed. If the investment is held for 7 years, only 85 percent of the original gain is taxed.
If an investment in a Qualified Opportunity Fund is held for 10 years, any tax on the appreciation of that investment is forgiven.
What are Opportunity Funds?
Opportunity Funds are Treasury-certified investment vehicles, that deploy capital into Opportunity Zones. Opportunity Funds are required to hold at least 90 percent of their assets in an Opportunity Zone, or face penalty for each month it fails to meet the investment requirement. The penalty equals the amount of the investment shortfall, multiplied by the underpayment rate as defined in Section 6621(a)(2) of the Internal Revenue Code.
View all Opportunity Zones Resources
-Official Treasury Designations
The U.S. Department of the Treasury has approved Opportunity Zones in every state and terriroty. Click on any of the links below to see where Opportunity Zones are located. A comprehensive list
of all designated Opportunity Zones is available from the CDFI Fund.
-Rules and Regulations
The U.S. Department of the Treasury continues to work through the process of codifying the regulatory framework for the Opportunity Zones incentive. CDFA will continue to update this page as additional tranches of guidance and proposed regulations are released.
Second Tranche of Proposed Regulations
The second tranche of proposed regulations, released on April 17, 2019, offer answers and clarity to a number of questions that arose following the release of the first tranche of Opportunity Zones guidance. The second tranche of IRS guidance primarily addresses the tax treatment and issues related to:
View the Second Tranche of Proposed Regulations
View Second Tranche Highlights from EIG
View Second Tranche Highlights from Opportunity Alabama
View Second Tranche Highlights from KPMG
View Second Tranche Highlights from Novogradac (Part 1)
View Second Tranche Highlights from Novogradac (Part 2)
View Second Tranche Highlights from Ballard Spahr
First Tranche of Proposed Regulations
- Operating businesses in Opportunity Zones;
- Land and land leases;
- The definition of original use and building vacancy;
- Opportunity Fund assets and investments.
The U.S. Department of the Treasury has released regulatory guidance on Opportunity Zones
and Opportunity Funds
. These regulatory proposals help to clarify how investors will engage in Opportunity Zones and provide more framework for communities to understand the types of businesses and real estate projects that are eligible for investment.
The regulatory proposals address several key areas, including:
- The requirements that must be met by a taxpayer to defer gains by investing in an Opportunity Fund;
- The rules permitting a corporation or partnership to self certify;
- The rules regarding the requirements that must be met by a corporation or partnership to qualify as an Opportunity Fund.
Additionally, the IRS has released a revenue ruling addressing:
View the First Tranche Proposed Regulations
View the Revenue Ruling
- The application to real property of the "original use" requirement in section 1400Z-2(d)(2)(D)(i)(II), and;
- The "substantial improvement" requirement in section 1400Z-2(d)(2)(D)(i)(II) and 1400Z-2(d)(2)(D)(ii).
-Opportunity Funds Resources
Final Opportunity Zones Regulations
This document contains final regulations governing the extent to which taxpayers may elect the Federal income tax benefits provided by section 1400Z-2 of the Internal Revenue Code (Code) with respect to certain equity interests in a qualified opportunity fund (QOF).
Notice of Proposed Rulemaking Community Reinvestment Act
On December 13, 2019, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) announced a proposal to modernize the agencies’ regulations under the Community Reinvestment Act (CRA) that have not been substantively updated for nearly 25 years. These proposed regulations will have a 60-day public comment period.
Opportunity Zone Reporting & Reform Act of 2019 - Detailed SummaryMembers only Login
The proposal requires information reporting from both Opportunity Funds and their investors. QOFs are required to report identifying information, amount and composition of assets, names and taxpayer identification numbers of investors, the amounts and dates of their investments, which zones the funds have invested in, and a variety of identifying information about the type of investments made.
CDFA Food Finance White Paper Series: Food Systems & Investment Tools
View more Oppportunity Funds Resources
This paper continues a white paper series demonstrating the ways in which traditional development financing is already supporting food systems, with a focus on finance tools that help to stimulate investment. An overview of investment tools, such as tax credits and opportunity zones, is provided with examples of current programs as well as an extensive collection of case studies to illustrate how these tools can make an impact.
-Opportunity Zones Resources
The CDFA Intro Opportunity Zones Finance WebCourse
will bring together program designers, fund managers, communities, investors, and policy experts to educate and review the most up-to-date thinking and strategies on how to maximize Opportunity Zone designations and how best to attract zone investments. This interactive webcourse will help communities bring all economic development stakeholders to the table, and have a firm understanding of how the development finance toolbox can both encourage and supplement Opportunity Fund investments.
View All Courses
CDFA Federal Financing Webinar Series: Opportunity Zones
The CDFA Federal Financing Webinar Series: Opportunity Zones is an exclusive, four-part online offering that will convene finance experts, federal agencies, and local development finance practitioners to discuss how federal financing tools can be used to leverage the Opportunity Zones incentive. The series will highlight the variety of ways federal grants, loans, guarantees and credit enhancements can be used to attract greater investment in Opportunity Zones, with a particular emphasis on rural development, infrastructure projects, affordable housing, environmental remediation and small business development.
Federal agencies are actively considering ways they can support projects in Opportunity Zones and encourage Opportunity Fund investments into the most highly distressed areas around the country. CDFA is working hand-in-hand with many of these agencies as they consider the shape and scale of their involvement with Opportunity Zones, and CDFA encourages all stakeholders to participate in the webinars and bring project questions and ideas to our expert panelists.
§ Opportunity Zones and Rural Development featuring USDA and EPA
§ Opportunity Zones and Affordable Housing featuring HUD and USDA
§ Opportunity Zones and Transportation featuring DOT and EDA
§ Opportunity Zones and Small Business Development featuring SBA and EDA
The CDFA Federal Financing Webinar Series: Opportunity Zones is a four-part offering available throughout the year. Those interested in attending the series can register for individual webinars or the full webinar series as a package deal. CDFA recommends registering for the full webinar series initially to take advantage of the best available pricing. Webinars will be recorded and made available to all registered participants.
Friday, March 8, 2019
|Fri 2:00 PM - 3:30 PM
Opportunity Zones and Rural Development featuring USDA and EPA
In this webinar, financing experts from the U.S. Department of Agriculture and Environmental Protection Agency provide an overview of how financing and grant programs can leverage investments into Opportunity Zones. CDFA centers the discussion around USDA Rural Development programs and EPA water and brownfield financing programs.
- Tim Fisher, Director, Government & External Affairs, Council of Development Finance Agencies
- Geoffrey Armes, Community Programs Specialist, U.S. Department of Agriculture
- David Foster, Acting Chief of Staff, Rural Business Service, U.S. Department of Agriculture
- Arielle Gerstein, Program Manager, U.S. Environmental Protection Agency
- Jon Grosshans, Community Planner, U.S. Environmental Protection Agency
- Jacqueline Ponti-Lazaruk, Chief Innovation Officer, U.S. Department of Agriculture
- Susan Woolard, Acting Branch Chief, U.S. Department of Agriculture
Thursday, June 27, 2019
|Thu 2:00 PM - 3:30 PM
Opportunity Zones and Affordable Housing featuring HUD and USDA
In this webinar, financing experts from the Departments of Housing and Urban Development and Agriculture provide an outline of how their respective financing and grant programs can drive investments into Opportunity Zones. CDFA centers the discussion around USDA Rural Development programs and HUD programs within the office of Community Planning and Development.
- Malcolm Guy, Coordinator, Government & External Affairs, Council of Development Finance Agencies
- James Carras, Principal, Carras Community Investment, Inc.
- Spencer Chretien, Special Policy Assistant, U.S. Department of Housing and Urban Development
- Martha E. Hanson, Finance and Loan Analyst, U.S. Department of Agriculture
Thursday, August 22, 2019
|Thu 2:00 PM - 3:30 PM
Opportunity Zones and Transportation featuring DOT and EDA
In this webinar, CDFA will convene financing experts from the Department of Transportation and Economic Development Administration to discuss how their respective financing and grant programs can incentivize Opportunity Fund investments into Opportunity Zones. CDFA will center the discussion around programs offered through DOT's Build America Bureau and Federal Highway Administration, as well as funding programs offered by the EDA
- Roger Bohnert, Director, Outreach and Project Development, U.S. Department of Transportation
- Doug Lynott, Director, Economic Development Integration, Economic Development Administration
- Peter Mancauskas, Financial Program Manager, Federal Highway Administration Office of Innovative Program Delivery
Thursday, October 24, 2019
|Thu 2:00 PM - 3:30 PM
Opportunity Zones and Small Business featuring SBA and EDA
In this webinar, CDFA will convene financing experts from the Small Business Administration and Economic Development Administration to discuss how their respective financing and grant programs can leverage Opportunity Fund investments in Opportunity Zones. CDFA will center the discussion around SBA 504 and 7(a) Loan programs, as well as the funding programs offered by the EDA