The QOZB 70% tangible property test

It is the requirement that at least 70% of the tangible property owned or leased by a Qualified Opportunity Zone Business (QOZB) be Qualified Opportunity Zone business property (QOZBP). The statute, §1400Z-2(d)(3), requires that “substantially all” of a QOZB's tangible property be QOZBP, and the regulations set that at 70%.^1,2

A QOZB is a corporation or partnership in which a Qualified Opportunity Fund (QOF) holds stock or a partnership interest, and which meets the tangible property test plus four others: at least 50% of gross income from the active conduct of a business in the zone, at least 40% of intangible property used in that business, less than 5% of property in nonqualified financial property, and no excluded sin business.^1,5 The 70% test is why most funds invest through a QOZB: a QOF holding property directly must meet 90%, while a QOZB needs 70%.⁶

Owned tangible property is QOZBP if it meets three requirements under §1400Z-2(d)(2)(D) and the regulations.^1,2

1. 1.Acquired by purchase, as defined in §179(d)(2), after the statutory cutoff date, from a person that is not related (using a 20% relatedness threshold). Self-constructed property counts as purchased if the QOZB builds it.
2. 2.Original use in the zone begins with the QOZB, or the QOZB substantially improves the property within 30 months (additions to basis above the starting basis, or 50% for property in a wholly rural zone).
3. 3.During substantially all (90%) of the QOZB's holding period, substantially all (70%) of the property's use is in a Qualified Opportunity Zone.

Leased tangible property is QOZBP if the lease was entered into after the statutory cutoff date, the terms are market rate (arm's length) at the time the lease is signed, and the 70% use and 90% holding-period requirements are met. Leased property does not need to be original use or substantially improved, and it need not be leased from an unrelated party, although related-party leases carry extra limits.^9,2 See leased property rules.

Divide the value of the QOZB's tangible property that is QOZBP by the value of all its tangible property, owned and leased. Values come from the QOZB's applicable financial statement if it has one, or from the alternative valuation method: unadjusted cost for owned property and the present value of lease payments for leased property.^3,7 The same methods are used for the QOF's 90% test, and the QOZB must apply one method to all its assets for a given year.⁷

Because cost rather than market value is used under the alternative method, appreciation in a building does not change the result; new purchases and dispositions do. Land counts as tangible property in both numerator and denominator. Land used in the trade or business can be QOZBP without separate improvement, subject to an anti-abuse rule for land held mainly for speculation.^4,6

Illustrative assumptions: a QOZB develops a single-building data center using the alternative valuation method. It buys land and builds new; it also buys some used equipment from an affiliate and owns a switching station that sits in the neighboring census tract outside the zone.

The cushion is 14.8 percentage points. If the QOZB later added $40 million of out-of-zone or non-qualifying property, it would fall to 68.3% and fail. Tracking new purchases against the test before closing them is the main compliance task. Equipment is often the swing factor because it is the largest share of cost: Cushman & Wakefield's 2026 cost guide puts power infrastructure at about 21% of a greenfield build, the largest single component, and reports average per-MW costs up 21% since its previous edition.¹⁴

Property being built or improved under a valid working capital safe harbor plan is treated as QOZBP during the safe harbor period, if it is expected to qualify when completed.^15,4 That is how a QOZB passes the test while its building is a hole in the ground. See the working capital safe harbor.

If a QOZB fails the 70% test, the regulations give it a one-time six-month period to cure the defect, during which the QOF's interest in it still counts as QOZ property.^8,4 A second failure has no cure. Failure flows up: if the QOZB stops qualifying, the QOF's interest in it is no longer QOZ property, which can push the fund below its 90% test. See the QOF 90% asset test.

Data centers concentrate value in equipment, and the test counts only what the QOZB owns or leases, so ownership boundaries decide the result. Commentators note the program's appeal for data center projects and the structuring issues it raises.¹²

Equipment refresh is a live issue. Hyperscalers depreciate servers over roughly five to six years, and Amazon shortened some lives to five years in 2025, so a 10-year hold usually includes replacements.¹³ Replacements bought new from unrelated vendors qualify; replacements bought from affiliates or used from inside the zone may not. See servers, equipment and the Opportunity Zone rules.

Passing the 70% test does not settle whether the QOZB is conducting an active trade or business. A QOZB that owns a building and leases it to one tenant on a triple-net basis is not engaged in an active trade or business under the regulations, even if all its property qualifies.^10,11 See powered shell and triple-net data centers.