Data centers in Opportunity Zones: the complete guide

Yes. A data center is not one of the excluded businesses, so a Qualified Opportunity Zone Business (QOZB) that develops, owns or operates a data center in a designated zone can qualify, and a Qualified Opportunity Fund (QOF) can invest in it.^1,2 A QOF is a corporation or partnership that holds at least 90% of its assets in Opportunity Zone property. A QOZB is an operating business, usually an LLC owned by the fund, that meets the business-level tests.

The excluded list is narrow: golf courses, country clubs, massage parlors, hot tub and suntan facilities, racetracks and other gambling facilities, and liquor stores.¹ Data centers are not on it. On September 16, 2026, Sen. Josh Hawley introduced the No Tax Breaks for Data Centers Act to exclude data centers from Opportunity Zone benefits, and House members introduced a separate bill aimed at the same incentives.³ These are proposals. As of October 20, 2026 neither had been enacted.

Data centers already sit in zones in large numbers. A report cited by the National Community Reinvestment Coalition and Sen. Hawley's office found that 14% of existing U.S. data centers, and 17% of those planned or under construction, are in Qualified Opportunity Zones.³ Location alone gives no benefit, though. The benefits go only to investors who put eligible capital gains into a QOF that meets the rules. Microsoft, Meta and Amazon told WIRED they do not use the program for their data center investments.⁴

This guide covers the rules that matter most and links to the detailed guides. For the general program, start with what an Opportunity Zone is and Opportunity Zone tax benefits.

Data centers are capital-heavy, long-lived real assets that are increasingly built where land and power are available, which often means lower-income and rural tracts, and the Opportunity Zone program rewards exactly that kind of long-term equity.

• Capital intensity. JLL forecasts average shell-and-core cost of $11.3 million per MW in 2026, and tenant AI fit-out can cost up to about $25 million per MW more.⁹
• Long holds. The 10-year exclusion suits infrastructure owned for a decade or longer.
• Location. Power availability now decides where data centers can be built, pushing development toward frontier and rural markets that overlap with eligible tracts.
• Rural enhancements. The 50% substantial improvement threshold and the 30% step-up for a Qualified Rural Opportunity Fund favor rural sites.

The full argument, with the counterpoints, is in why data centers are a natural fit for Opportunity Zones.

The usual structure has two tiers: investors put capital gains into a QOF, and the QOF invests in a QOZB subsidiary that owns or leases the land, builds the facility and runs the business.

Debt is usually raised at the QOZB, because the investor's Opportunity Zone investment must be equity. See how a data center Opportunity Zone fund works and the capital stack for an Opportunity Zone data center.

Five rules decide most data center deals: the active trade or business requirement, the 70% tangible property test, the working capital safe harbor, original use or substantial improvement, and the 10-year holding period.^1,11

Not by itself. Under the regulations, owning and operating real property, including leasing it, can be an active trade or business, but merely entering into a triple-net lease is not.^1,10 A triple-net lease is one in which the tenant pays taxes, insurance and maintenance in addition to rent and utilities.¹⁰

The final regulations illustrate the line. A landlord that leases an entire building to a single tenant on a triple-net basis is not engaged in an active trade or business, even with an on-site office handling lease issues. A landlord that leases part of a building triple-net and actively manages and operates the rest through on-site employees is.¹¹

Practical considerations, not rules: structures with more defensible facts include multi-tenant colocation, operator-provided services (power management, cooling, security, remote hands), modified-gross leases with landlord operating duties, and a QOZB that operates the data center itself.¹² Each is fact-specific. Detail is in powered shell and triple-net data centers in Opportunity Zones and data center lease structures.

Servers count toward the QOZB's 70% test only if the QOZB owns or leases them, and because they wear out in five to six years they cannot carry a 10-year gain the way the building and power infrastructure can.¹³

• Tenant-owned equipment. If the tenant owns the servers, they are outside the landlord QOZB's 70% test entirely. That is the common powered-shell and wholesale pattern.
• QOZB-owned equipment. Equipment bought from an unrelated party, with original use in the zone, can qualify. Each replacement over the hold must also meet those requirements.
• Equipment sold before year 10. Gain on assets sold before the 10-year mark is not covered by the exclusion. A QOF that sells qualifying property has 12 months to reinvest the proceeds for the 90% test, but that relief does not defer the gain.²³
• After year 10. For partnership or S corporation QOFs, investors can elect to exclude gain on asset sales, including depreciation recapture, other than inventory.²⁶
• Depreciation. 100% bonus depreciation is permanent for qualifying property acquired after January 19, 2025, and much data center equipment falls in short-life classes. The building shell, as 39-year property, does not qualify.¹⁴

Practitioner commentary says the treatment of servers is less settled than that of the shell, power, cooling and backup generation. See servers, equipment and the Opportunity Zone rules and depreciation and Opportunity Zones.

Often not on its own. A QOZB can hold cash as working capital for up to 31 months under a written plan and schedule, and overlapping or sequential plans can extend that to 62 months from the first cash infusion.¹⁵ Data center power can take longer.

Dominion Energy said in 2024 that connecting data centers above 100 MW in Northern Virginia could take up to seven years.¹⁶ For on-site or co-located generation, LBNL found the median time from interconnection request to commercial operation exceeded four years for projects built from 2018 to 2024.¹⁷ The safe harbor is tolled for delay caused by government action on a completed application when nothing else can be done, and a federally declared disaster can add up to 24 months.¹⁵ Whether a utility's study and construction delays count as governmental delay has not been addressed in guidance.

• Choose sites with power in hand, or a signed service agreement with a near-term energization date.
• Call capital in tranches, each with its own 31-month plan, within the 62-month maximum.
• Spend early cash on land, design, long-lead electrical equipment and substations, all of which the plan can schedule.
• Watch Notice 2026-55, which asks whether a QOZB should be allowed to modify an existing working capital plan.

More in data center power timelines and the Opportunity Zone clock and the working capital safe harbor.

Rural zones offer the land, transmission access and phasing room large campuses need, plus two rural incentives: a 50% substantial improvement threshold for existing buildings and a 30% step-up for investors in a Qualified Rural Opportunity Fund.^18,19

A rural area is anywhere outside a city or town of more than 50,000 people and its contiguous urbanized area. Notice 2025-50 lists 3,309 wholly rural zones on the current map, and 8,334 of the 25,332 tracts eligible for the new map are wholly rural.¹⁸ WIRED reported, citing Searchlight Institute research, that more than 100 planned or developing rural data center projects could qualify for the enhanced rural benefits from 2027.⁴

Conversions of mills, factories and power plant sites are a natural fit for the substantial improvement test, because only the building's basis sets the hurdle and data center fit-out (power, cooling, structural work) is expensive. Land does not need to be separately improved. Ground-up builds on raw land meet original use for the new building. See rural data centers, Qualified Rural Opportunity Funds and converting industrial buildings into data centers.

The main risks are structural (the active business test and equipment turnover), timing (power and the working capital clock), market and community (state incentive cutbacks and local opposition) and policy (proposals to exclude data centers).

• Federal policy. Beyond the Hawley bill, Reps. Kristen McDonald Rivet and Don Davis introduced a House bill to bar data centers from incentives including 100% bonus depreciation and Opportunity Zone benefits, and Sen. Ron Wyden released a framework (not a bill) that would strip those benefits from data center developers.³ House Ways and Means Chair Jason Smith called the claim that the zones will be used for data centers a huge stretch, saying data centers can be used in them, but so can everything else.²⁰
• State incentives. NCSL counted 38 states with dedicated data center incentives and found lawmakers in 28 states introduced bills in 2026 to scale back or modify programs.²⁴ Several states paused new applications in 2026.
• Local opposition. Data Center Watch counted at least 75 projects worth about $130 billion blocked or delayed in the first quarter of 2026.²¹
• Program evidence. GAO found QOFs held more than $108 billion in assets at the end of 2024 but said the effects of the incentive were mostly unknown.²²
• State tax. Opportunity Zone benefits are federal. California, for example, does not conform to federal deferral or exclusion.²⁵

Weigh these against the general risks in the risks of Opportunity Zone investing. OZ Data Centers sponsors funds of this kind; if you are evaluating a site or an investment, talk to our team. Structuring decisions depend on the facts, so confirm the analysis with your tax adviser.