Opportunity Zone Program: Key Changes Ahead

The federal Opportunity Zone program, originally created under the Tax Cuts and Jobs Act of 2017 to encourage investment in low-income communities through tax incentives, will sunset at the end of 2026.

A new Opportunity Zone program, established by tax legislation passed in 2025, will replace it. Key milestones include:

• July 1, 2026: State governors must designate new Opportunity Zone areas.

• January 1, 2027: The new program officially opens for investment.

What’s Changing?

• Eligibility Criteria Tightened:

  • Poverty rate must be at least 20%, or

  • Median household income must not exceed 70% of area median income (previously 80%).

  • No allowances for contiguous tracts exceeding 125% of area median income.

• Fewer Zones Expected:

  • About 26,000 tracts may qualify under the new rules.

  • If states select the maximum allowed 25%, roughly 6,500 zones will be designated, a 26% decrease from the original program.

• Transparency & Permanence:

  • Increased reporting requirements.

  • Program becomes permanent with a rolling 10-year cycle for designating zones.

Implications for Businesses and Investors

Experts recommend preparing now, as the designation period is expected to involve significant lobbying and competition for inclusion. The new program’s stricter criteria mean fewer qualifying areas and potentially greater demand for investment opportunities.