Buying land for an Opportunity Zone data center

Land gets lighter treatment than buildings: it does not need to be original use or substantially improved, but it must be bought from an unrelated person and used in the zone business. The IRS said in Rev. Rul. 2018-29 that the original use requirement does not apply to land, and that a fund buying an existing building need not separately improve the land under it¹. The final regulations carry this into the operating rules for a Qualified Opportunity Zone Business (QOZB), the operating company a fund invests in².

There is one guardrail. Treasury added an anti-abuse rule for unimproved land: if land is bought with the expectation that it will not be improved by more than an insubstantial amount within 30 months, the land cannot rely on the favorable treatment³. A data center site that will host a powered building is the opposite fact pattern, but a land bank held for an undefined later phase is not. Each parcel should have a documented development plan.

The related-party rule matters most for land, because landowners often want to join the deal. Under §1400Z-2(e)(2), persons are related if they share 20% or more common ownership, a tighter test than the usual 50%⁴. If the seller will own 20% or more of the QOZB, the land fails the purchase requirement. See related-party rules in Opportunity Zone deals and the separate guide for landowners.

Confirm the census tract for every parcel with the official CDFI Fund mapping tool, then confirm that tract will be designated for the period your project runs⁵. A parcel that straddles a tract line needs each portion checked. Download Census TIGER/Line tract boundaries if your engineer is overlaying the site plan in GIS¹⁹.

Timing is the hard part right now. Newly designated zones take effect January 1, 2027 and run through December 31, 2036. Under Notice 2026-40, property acquired after 2026 in a currently designated zone that is not redesignated generally does not qualify as QOZ business property, with narrow exceptions for working capital plans already under way⁶. As of October 2026, Treasury had not published a consolidated national list of the new zones. Until it does, treat a parcel as qualifying only if its tract appears on the state's nomination list and you can close after certification. Our guides to checking if a property is in an Opportunity Zone and the new maps taking effect in 2027 walk through the lookup.

Check rural status at the same time. A zone made up entirely of rural area lowers the substantial improvement threshold to 50% and lets a Qualified Rural Opportunity Fund offer investors a 30% basis step-up. Rural means outside any city or town of more than 50,000 people and its adjacent urbanized area⁷. See rural Opportunity Zones.

Power decides whether the land is a data center site at all, so get a utility answer on capacity and date before you close. In Northern Virginia, Dominion Energy said connecting loads above 100 MW could take one to three years longer than before, for total waits of up to seven years⁹. Utilities are also adding large-load tariffs. AEP Ohio's approved tariff requires new data centers above 25 MW to pay for at least 85% of subscribed demand for up to 12 years¹⁰.

• A written capacity response or will-serve letter naming megawatts, voltage and an energization window.
• Distance to transmission lines of 115 kV and above. EIA notes that transmission line data come from the HIFLD dataset, while substation locations are not published, so ask the utility directly¹¹.
• Status of any required load study, and who pays for the substation and line extension.
• Tariff terms: minimum demand charges, contract length, collateral and exit fees.
• If on-site generation is planned, its permitting path and fuel supply.

The Opportunity Zone clock makes this sharper. A QOZB can hold cash for 31 months under a written working capital plan, extended to 62 months with overlapping plans, and utility delays are not clearly the government permitting delays that toll that clock². Buying land years before power arrives can strand equity. Read the working capital safe harbor and power interconnection guides before signing.

Confirm water supply and discharge capacity in writing, and map at least two independent fiber routes to the site. Water use depends on the cooling design. U.S. data centers used about 17.4 billion gallons of water directly in 2023, and LBNL projected that could double or quadruple by 2028¹². A closed-loop or air-cooled design cuts the requirement but usually raises power use.

• Water: municipal capacity letter or groundwater rights, drought restrictions, wastewater and blowdown discharge permits, and any local water ordinance aimed at large users.
• Fiber: long-haul routes near the site, carrier-neutral facilities and exchanges within reach (PeeringDB lists facilities and carriers¹⁴), lateral construction cost, and route diversity.
• Last-mile broadband data from the FCC National Broadband Map helps show which providers serve the area, though it is built for consumer service rather than wholesale fiber¹³.

Our guides to water and cooling and fiber for rural sites cover design options and costs in detail.

Confirm the use is allowed, find out whether approval is by right or discretionary, and check for pending moratoria. Discretionary approvals are where projects stall. Data Center Watch counted at least 75 projects worth about $130 billion blocked or delayed in the first quarter of 2026 alone¹⁷. Pima County, Arizona adopted a 120-day moratorium on new data center projects in unincorporated areas in September 2026¹⁶.

• Zoning district, height limits, setbacks, noise standards and generator rules.
• Air permits for backup generators or on-site gas turbines.
• FEMA flood zone status from the National Flood Hazard Layer¹⁵.
• Environmental site assessment, wetlands and endangered species review.
• Road access for construction loads and transformer deliveries.
• Local tax abatement or PILOT practice, which can affect title structure.

Engage the community before you are committed. The community engagement guide explains how.

Most sponsors option the land first, close only when power and zoning are clear, and consider a ground lease when the landowner will not sell. Each choice interacts with the rules.

Leased property can count toward the QOZB's 70% tangible property test if the lease is on market terms². Ground leasing keeps fund equity out of non-depreciable land. Details are in the leased property rules. For a building conversion, the purchase price allocation between land and building matters, because only the building's basis sets the substantial improvement hurdle. The allocation must be supported by an appraisal.

A ready site passes on tract, power, water, fiber, zoning and seller independence, with any open item tied to a dated plan. The scorecard below shows a typical candidate partway through diligence. For how sponsors rank whole regions, see data center site selection inside Opportunity Zones.