Opportunity Zones for data center developers

They offer long-dated equity from investors who are deferring capital gains and want a 10-year hold. Investors who put gains into a Qualified Opportunity Fund (QOF) get a five-year deferral, a 10% basis step-up (30% for a Qualified Rural Opportunity Fund) and exclusion of appreciation after 10 years². That matches the life of a powered building and its electrical plant. In return, the fund and its operating company must pass annual tests. Data centers are not on the excluded business list, though a bill introduced in September 2026 would add them; it was not law at this review¹⁸.

See how a data center Opportunity Zone fund works and the capital stack for an Opportunity Zone data center.

The operating company must clear four percentage tests plus the active business and excluded-business rules in the regulations¹. The QOF above it must hold at least 90% of its assets in qualifying property, averaged over two semiannual testing dates.

QOZ business property must be acquired by purchase from an unrelated person, meet original use or substantial improvement, and be used in the zone for substantially all of the holding period¹. Detailed guides: the 70% tangible property test and gross income, intangibles and financial property tests.

It is the riskiest structure, because the regulations say merely entering into a triple-net lease is not the active conduct of a trade or business³. A final-regulation example treats a landlord that leases a whole building to one tenant on a triple-net basis as not active, even with an on-site office; a landlord that actively manages other parts of the building with its own employees is active⁴. No guidance addresses hyperscaler data center leases specifically, and Dentons flagged the issue for these deals in April 2026⁵.

Fact-specific advice from tax counsel is essential here. See powered shell and triple-net data centers and data center lease structures.

Only if power is in hand or near-term, or capital is phased so each tranche has its own plan. A QOZB can hold cash for up to 31 months under a written plan and schedule, and overlapping plans can stretch to 62 months from the first infusion; government action on a completed application can toll the period⁶. Utility study and construction delays are not clearly government permitting delays. Dominion Energy has said waits for loads above 100 MW could reach seven years in Northern Virginia⁷, and median generator interconnection times now exceed four years⁸.

Our guides to the working capital safe harbor and power timelines cover the mechanics.

Short-lived equipment and building conversions both work, but each needs a plan. Hyperscalers depreciate servers over about five to six years; Meta, for example, uses 5.5 years⁹. Equipment the QOZB owns counts in its 70% test, and each replacement must itself be purchased from an unrelated person and placed in service in the zone. Equipment the tenant owns is outside the QOZB's test. Proceeds from selling property inside a QOF can be reinvested within 12 months without failing the 90% test, but that relief does not defer the gain¹⁷. Permanent 100% bonus depreciation applies to qualifying property acquired after January 19, 2025, though not to the 39-year building shell¹⁰.

For conversions, an existing building is substantially improved when added basis within 30 months exceeds its starting basis. In a zone made up entirely of rural area, that threshold is 50% under the law and Notice 2025-50¹¹. Husch Blackwell notes the rule's relevance to adaptive reuse in rural zones¹². Land is excluded from the hurdle. See servers, equipment and the rules and converting industrial buildings.

Expect semiannual asset testing, annual Form 8996 filings, written working capital plans, and new information reporting with daily penalties. Form 8996 certifies the QOF and reports its 90% test each year¹³. New §6039K and §6039L reporting adds a penalty of $500 per day, capped at $10,000 per return or $50,000 for funds above $10 million of gross assets¹⁴. Proposed regulations published September 11, 2026 set out the data items; they are not final.

OZ Data Centers runs its QOZBs with QOZB Management LLC handling this compliance work. Whoever does it, budget for it. See managing a data center QOZB and reporting requirements and penalties.

Developers new to the program should also read Opportunity Zone data center development timeline.