OPPORTUNITY ZONE PROGRAM

• The Tax Cuts and Jobs Act (TCJA) established the Qualified Opportunity Zones (QOZ) program to encourage investment in economically distressed communities.

• The program offers preferential capital gains treatment for investments made within designated low income census tracts.

• Investors benefit from a temporary deferral of capital gains taxes when those gains are reinvested in a Qualified Opportunity Fund (QOF) within 180 days of realization.

• A 10% step-up in basis is available for capital gains reinvested in a QOF and held for at least five years.

• For investments held for seven years, the basis increases by an additional 5%, allowing investors to exclude up to 15% of the reinvested capital gains from taxable income.

• After 10 years, QOF investors can permanently exclude from taxation any capital gains earned from their investment in the fund.

• Original Opportunity Zone designations remain valid through December 31, 2028, with both the 1.0 and 2.0 maps recognized during the overlap period (January 1, 2027 – December 31, 2028); after that date, only OZ 2.0 designations remain in effect.

• In California, the Department of Finance (DOF) recommends census tracts for Opportunity Zone designation. The Governor then submit California's final list of recommended census tracts to the U.S. Treasury by September 28, 2026.