Opportunity Zones After the One Big Beautiful Bill Act: Five Essential Takeaways for Your Tax Strategy

The One Big Beautiful Bill Act (OBBBA) (P.L. 119-21) makes the Opportunity Zone (OZ) program a permanent part of the tax landscape and introduces several important changes. While many of these updates will play out over the coming years, a few have near-term planning implications that investors and advisors should understand now.

1. New Opportunity Zones from 2027

By July 1, 2026, each state will be required to designate a new set of Opportunity Zones, which will become effective on January 1, 2027. The definition of “low-income community” and the census data used for these designations will differ from the original Tax Cuts and Jobs Act (TCJA) framework, so many current OZs are unlikely to retain their OZ status under the new regime. In addition, the OBBBA repeals the prior rule that allowed states to designate contiguous tracts with higher median income.

Planning angle: Investors considering an existing OZ should be mindful that its status may change after 2026. Because the grandfathering rules for the initially designated zones are not yet fully clear, timing of new investments will be critical and should be coordinated with a qualified tax advisor.

2. An 18‑Month “Dead Zone” for New OZ Investments

The extender provisions apply only to eligible gains invested after December 31, 2026. Eligible gains invested on or after January 1, 2027, can qualify for a five‑year deferral and a 10% basis step-up (or 30% in certain rural cases discussed below). By contrast, eligible gains invested on or before December 31, 2026, are deferred only until December 31, 2026, and do not receive any basis step‑up.

Planning angle: Many practitioners are referring to the period leading up to 2027 as an OZ “Dead Zone” for new gain deferral strategies. Investors may want to structure property sales so that eligible gains arise in 2027 or later. For example, owners in pass‑through entities can sell capital assets as early as January 1, 2026, and still take advantage of a 180‑day OZ investment window that can begin as late as the unextended due date of the entity’s tax return (e.g., March 15, 2027, for a calendar‑year partnership). Installment sale structures may also be considered to generate eligible gains in 2027 and beyond.

3. Previously Deferred Gains Still Taxable in 2026

The OBBBA does not change the treatment of gains previously deferred under the original TCJA OZ rules. Those gains are still scheduled to become taxable on December 31, 2026. OZ investors should evaluate how this inclusion event will affect their 2026 tax liability and overall cash flow.

Planning angle: Under the OZ rules, the 2026 inclusion amount is generally the lesser of (a) the previously deferred gain or (b) the fair market value (FMV) of the investor’s interest in the Qualified Opportunity Fund (QOF). Where an OZ investment has underperformed, it may be worthwhile to obtain a third‑party valuation that supports a QOF equity value below the deferred gain amount. Investors can also consider realizing capital losses in 2026 to help offset the gain recognition.

4. Enhanced Benefits for Rural OZ Investments

The OBBBA introduces heightened incentives for qualifying rural Opportunity Zone investments. For these purposes, a rural area is generally defined as a city or town with fewer than 50,000 inhabitants. Rural-focused structures receive two notable advantages:

• Investors in “qualified rural opportunity funds” are eligible for a 30% basis step‑up after five years.

• The “substantial improvement” requirement for tangible property is relaxed, requiring only a 50% increase in basis instead of the traditional 100% threshold.

  
  

Planning angle: Because OZ designations are the result of collaboration between state governors and the Treasury Department, stakeholders who see potential in particular rural communities may wish to engage with their governor’s office to advocate for those areas in the next designation round.

5. More Robust Reporting and New Penalties

The original TCJA framework intentionally kept OZ reporting relatively simple. The OBBBA reverses that trend by creating new reporting requirements for both QOFs and the underlying Qualified Opportunity Zone Businesses (QOZBs). QOZBs, which previously had no direct reporting obligations, will now face additional compliance responsibilities. The legislation also introduces monetary penalties for non‑compliance, which can be as high as $50,000 in some cases.

Planning angle: With increased reporting and meaningful penalties, the cost of poor documentation or lax compliance rises. Investors should prioritize working with sponsors and advisors who have strong operational controls, tax expertise, and a clear reporting framework.

Why Now Is a Good Time to Revisit OZ Strategies – And Consider MyTimeEquity

The OBBBA effectively ushers in “OZ 2.0”: a permanent, more targeted, and more complex Opportunity Zone regime. The upcoming 2027 zone redesignations, the temporary “Dead Zone” for new gain deferrals, and the enhanced benefits for rural projects all create both risk and opportunity for investors who understand the rules and act strategically.

MyTimeEquity’s Opportunity Zone Fund has been structured with these regulatory changes in mind, emphasizing compliant fund design, disciplined underwriting, and a curated pipeline of projects that aim to combine long-term community impact with tax‑efficient income and growth potential. If you are assessing how the evolving OZ landscape fits within your broader wealth or tax strategy, this is an opportune time to review the MyTimeEquity OZ Fund and explore whether it could play a role in your portfolio. Click here to speak with an expert and learn more.