What is an Opportunity Zone?

An Opportunity Zone is an economically distressed census tract that the federal government has certified as a place where new, long-term equity investment earns capital gains tax benefits.¹ The designation rules are in IRC §1400Z-1 and the investor benefits are in IRC §1400Z-2, both made permanent by Public Law 119-21, the One Big Beautiful Bill Act, signed July 4, 2025.^2,3

The zone itself is just a map boundary. Nothing changes for the people and businesses already there. What changes is the tax treatment of new money that flows in through a specific vehicle, the Qualified Opportunity Fund (QOF). A QOF is a corporation or partnership organized to invest in Opportunity Zone property that self-certifies on IRS Form 8996.⁶ The fund either owns zone property directly or, more often, owns equity in an operating company called a Qualified Opportunity Zone Business (QOZB).

Read the companion guides for the vehicle and the business: what a Qualified Opportunity Fund is and what a Qualified Opportunity Zone Business is.

Only tracts that meet the statutory definition of a low-income community can be designated.¹ A census tract is a small statistical area defined by the Census Bureau, usually home to a few thousand people. The test uses American Community Survey data and has two alternative prongs.¹⁰

A tract that meets the 70% income prong qualifies regardless of its poverty rate. The 125% ceiling limits only the poverty prong, so a high-poverty tract with relatively high median income cannot be designated.¹⁰ Treasury published the eligible list in Rev. Proc. 2026-14: 25,332 tracts, of which 8,334 are wholly rural.⁴

Governors nominate and the Treasury Department certifies. Each state's chief executive has 90 days after a determination date to nominate tracts from the eligible list, and Treasury then certifies the nominations.^1,4 The first determination date under the permanent rules was July 1, 2026, and a new one follows every 10 years.⁷

A state may designate no more than 25% of its low-income-community tracts, or 25 tracts if that is greater.¹² The CDFI Fund, a Treasury bureau, runs the online nomination tool and publishes the official zone lists.¹¹

More on the process is in how Opportunity Zones are designated and the new zone maps taking effect in 2027.

There are 8,764 Opportunity Zones in effect today, of which 3,309 consist entirely of rural areas, according to the IRS.⁵ Those zones remain in effect through December 31, 2028 (December 31, 2027 in Puerto Rico), overlapping with the new map.⁷ The new zones take effect January 1, 2027 and run through December 31, 2036.⁷

As of October 20, 2026, Treasury has not published a consolidated national list of the zones that take effect in 2027. States have been filing nominations, and certifications are expected through late 2026. Use our guide to checking whether a property is in a zone and confirm against the official CDFI Fund list once it is released.¹¹

Opportunity Zones offer three federal income tax benefits to investors who put eligible capital gains into a QOF within 180 days of the sale.² For amounts invested on or after January 1, 2027, the benefits work like this:^2,3

The exclusion is usually the largest benefit. The deferral and step-up apply to the old gain; the exclusion applies to all the new growth. The full mechanics are in Opportunity Zone tax benefits, explained.

No. The IRS states that you can use the incentive even if you do not live, work or have a business in an Opportunity Zone.⁶ What matters is where the fund's money goes, not where the investor is. Individuals, corporations, partnerships, trusts and estates with eligible gains can all invest, and nonresident aliens and foreign corporations can generally defer gains that are subject to U.S. tax.⁶

Conversely, owning property in a zone does not by itself earn any benefit. A landowner gets OZ treatment only by selling to, or investing through, a QOF structure that meets the rules. See who can invest in an Opportunity Zone fund.

Any active business that is not on the excluded list can qualify, but most capital has gone to real estate. GAO reported in August 2026 that QOFs held more than $108 billion in assets at the end of 2024, mostly invested in urban real estate.⁸ Novogradac tracks $43.61 billion of equity raised by funds that report to it through the first quarter of 2026.⁹

The excluded list is short: golf courses, country clubs, massage parlors, hot tub and suntan facilities, racetracks and other gambling facilities, and liquor stores.² Housing, industrial, hospitality, operating companies and infrastructure all fit. To qualify, the project generally has to be new construction or a substantial renovation; buying an existing building and doing nothing does not work.

Why data centers fit the program

Data centers are among the most capital-intensive real assets being built, and many sites with land and transmission capacity sit in low-income, often rural tracts. A new campus is original-use property, so it does not need to meet the substantial improvement test. The main design issue is the lease: under the regulations, merely entering into a triple-net lease is not an active trade or business, so a fund that owns a building leased to one tenant on triple-net terms has a qualification problem.¹³ Data centers in Opportunity Zones covers the structures that work.