Policy Issues



Created in the Tax Cuts and Jobs Act of 2017, Opportunity Zones (OZs) are designated, low-income census tracts where qualifying investments are eligible for reduced capital gains taxes. By channeling investment where it is most needed and prioritized by states and local communities, OZs help stimulate job creation and economic growth in low-income communities.

Capital gain from prior investments—proceeds from the sale of real estate, stocks, securities, etc.— can be rolled into an Opportunity Fund and the tax that would otherwise be owed on the gain from the prior investment is deferred and not taxed until the end of 2026. Second, capital gains tax on this deferred gain is reduced by 10% if the investment is held for five years or 15% if the investment is held for seven years (through a tax basis “step-up”). Third, capital gain generated from the investments made by the Opportunity Fund is exempt from capital gains tax altogether if the investment in the fund is held for at least 10 years.

Unfortunately, delays in the rulemaking process and the onset of the COVID-19 pandemic have short-circuited the full impact of OZs. The final OZ regulations were issued just four months (December 2019) before COVID-19 caused a national economic lockdown that severely affected taxpayers’ ability to launch new real estate projects and other businesses.

In addition, the tax benefits associated with OZ investments are gradually phasing down and a significant OZ tax incentive expired at the end of 2021. Investors no longer qualify for the 15% basis step-up that applies to prior gain if the investment is maintained for at least seven years. Separately, the economic value of the temporary tax deferral that applies to gain rolled into an Opportunity Fund is gradually declining as 2026 draws near.

Bipartisan, bicameral legislation (S. 4065 / H.R.7467) introduced by Senators Cory Booker (D-NJ) and Tim Scott (R-SC) and Representative Ron Kind (D-WI) and Mike Kelly (R-PA) in the 117th Congress would have extended the OZ deadlines by two years and make other important OZ reforms. The reforms include sunsetting the eligibility of certain high-income OZ census tracts for future investments, mandating new OZ information reporting rules, and creating a new fund for localities to support businesses and projects in OZs.


In the short time since their enactment, OZs have created jobs and spurred billions of dollars in new investment in economically struggling communities across the country. 

Opportunity Funds have financed affordable, workforce, and senior housing, grocery-anchored retail centers, and office buildings that allow new and growing businesses to gain a presence and create jobs in long-neglected neighborhoods.

Other examples of productive activities in OZs include the rehabilitation of dilapidated buildings into new hotels that boost local tax revenue and serve as a magnet for jobs, visitors, and economic activity in the surrounding area.


  • OZs have demonstrated extraordinary potential to improve communities. In 2020, the Council of Economic Advisors estimated that the Opportunity Funds had raised $75 billion in private capital in the first two years following the incentives’ enactment, including $52 billion that otherwise would not have been raised. The council projected this capital could lift one million people out of poverty in OZs by 11%.
  • Most recently, the GAO estimated that 6,000 Opportunity Funds with more than 18,000 partners or shareholders invested $29 billion in OZs in 2019 alone.
  • The decentralized design of OZs allows more investors and stakeholders to participate in the market and invest in qualifying projects that generate economic opportunity and improve the built environment in high-need communities.
  • Congress should act quickly to extend expired OZ deadlines, as proposed in S. 4065 / H.R.7467. Extending the deadlines would ensure that OZs continue to act as a catalyst for economic development in struggling communities and allow the program to fulfill its original promise.
  • Congress should also continue working on improvements to the OZ tax incentives, such as enhanced information reporting, data collection, and transparency, as well as lowering the substantial improvement threshold to cover a broad range of real estate rehabilitation and redevelopment projects. 

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