Opportunity Zones—Expanded Under the 2025 Act

The concept of Opportunity Zones (OZ) should be familiar to most real estate practitioners, especially those involved in development activities in the USA.

This concept of Opportunity Zones, part of the tax law housed in the 2017 Tax Cuts and Jobs Act, was designed to encourage investments in areas where the thought was that without capital infusion, some economically distressed areas in the US would find it difficult to develop good housing and jobs for their residents in the area.

 Senator Tim Scott and President Trump, among others, concluded that good tax incentives might spur more development in blighted areas and in parts of the US that were struggling to attract capital to their part of the country.

By providing tax incentives for investors to consider building and developing qualified properties in an OZ as provided in the 2017 Act, such capital funds would help to encourage the economies in these weak financial areas.

These tax incentives, when complying with the requirements of Internal Revenue Code Section 1400 Z, the Opportunity Zone law taken from the 2017 Act, provided for deferring income when taking the capital gains from one investment and investing them in a qualified OZ area.  Additionally, some income earned from the prior investment and from funds invested into the OZ were not taxed.  This, the deferral and exclusion of income from taxation encouraged investments in these OZ areas.

This 2017 Program of OZ was about to expire for the most part in 2025.  However, in 2025, the OZ concept and benefits were modified and expanded to cover additional years to encourage investments and developments in the areas that the governments on the Federal and state levels determined as qualified as an OZ.

With such qualifications, given the history of the OZ starting in 2017, this would encourage more capital to flow to these areas in need of development.

One question that was raised in a recent article in the Triangle Business Journal (8/12/2026) was to determine how successful the OZ concept was (and will be) to attract capital to these special areas in need of monetary infusion.

The reality is that the value of OZ to attract capital is being tested; the returns are not certain.  As noted in The Business Journal/National Observer article:

“We know that yes, from a tax perspective, billions of dollars were invested,” said Jeanne Milliken Bonds, former mayor of Knightdale, North Carolina, and a professor of the practice of public policy at UNC-Chapel Hill who described herself as a proponent of the Opportunity Zones program. “But we don’t know the output to know if it really achieved its goal, which was to help underinvested communities perform better. We don’t know about jobs and what it did for people’s lives.” (The Business Journals, The National Observer (Aug 2026).

As mentioned, the OZ concept, with some changes, was expanded in the 2025 Act.  How successful the OZ concept and tax rules have been and will be in encouraging the desired result of helping cities to develop jobs and other economic benefits remains to be seen.

By

Mark Lee Levine, Professor at the University of Denver