The Qualified Opportunity Zone (QOZ) program, originally established under the 2017 Tax Cuts and Jobs Act, was designed as a temporary tax incentive program to spur investment in economically distressed communities. It allowed investors to defer capital gains until December 2026 and offered varied tax reductions based on how long the investment was held.
On July 4, 2025, as part of the Trump Administration’s One Big Beautiful Bill Act (the OBBBA) the QOZ program received an indefinite extension. This move was driven by the program’s proven success in stimulating economic growth and revitalizing underserved communities. Building on these positive outcomes, the OBBBA introduced key modifications and enhancements designed to strengthen the program’s impact and broaden its reach. Let’s take a closer look at some of the major changes and how they differ from the original 2017 legislation:
• Program Duration: The QOZ program was scheduled to sunset for all new investments on December 31, 2026. Under the OBBBA, the sunset has been repealed, allowing ongoing investment into Qualified Opportunity Funds (QOFs) without a deadline.
• Zone Designation: Under the 2017 QOZ program, governors were given a one-time opportunity to designate up to 25% of eligible low-income census tracts in their states as QOZs. No updates or replacements were allowed, which meant, once designated, the selections remained fixed up until December 31, 2026.
Under the OBBBA, beginning July 1, 2026, states will be able to re-designate their QOZs every 10 years. This allows for states to review economic data and make applicable adjustments to the current designations. The newly designated zones will take effect on January 1, 2027. Also, under the OBBBA, the definition of “low-income” has been tightened to include only those census tracts where the median family income does not exceed 70% of the state median (down from 80% under the 2017 legislation).
• Capital Gain Deferral and Step-Up Basis: The QOZ program allows investors to defer capital gains by reinvesting them into QOFs within 180 days of realizing the gain. The 2017 legislation allowed investors to defer taxes up until December 31, 2026 with a three-tiered step-up in basis structure: If the QOF investment was held for at least five years, there was a 10% step-up in basis. And, if held for seven years – 15%. For investments held for at least 10 years, the investor had the potential to eliminate any capital gains tax owed.
The OBBBA introduces a rolling five-year deferral period for gains invested after December 31, 2026 with no fixed end date. The deferred gain will be recognized five years from the date of investment or when the QOF investment is sold (whichever comes first). If the QOF investment is held for at least five years, the program offers the investor a single 10% step-up in basis, without the additional tiered benefits. This structure is permanent under the OBBBA.
• Rural Investment: The OBBBA introduces Qualified Rural Opportunity Funds (QROFs) to encourage investment in rural areas. QROFs must invest at least 90% of their assets in QOZ property located entirely within rural zones. The rural area must be located outside cities or towns and have a population of 50,000 people or less.
Investments in QROFs receive a 30% step-up in basis after five years, compared to the standard 10% for other QOFs. Additionally, rural zones benefit from a reduced 50% substantial improvement threshold, making rehabilitation and qualification more feasible in these areas. For instance, if a QOF acquires a property with an adjusted basis of $2 million, it only needs to invest $1 million in improvements to meet the substantial improvement test – rather than the full $2 million as required for other QOFs.
• Increased Reporting Requirements: Under the 2017 legislation, there were limited reporting requirements for investors. Under the OBBBA, QOFs will be required to file annual reports with detailed information to the IRS, including, but not limited to, the following:
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- The amount and type of investment made
- The number of employees
- The location of the investment
- If the investments met the substantial improvement tests
Qualifying Opportunity Zone Businesses (QOZBs) will also be required to file reports regarding their business activity, such as the use of funds, compliance with business requirements and community impact metrics. Failure for the QOFs and QOZBs to comply with the new reporting requirements may result in penalties of up to $10,000 per return, or up to $50,000 for QOFs with over $10 million in assets, with harsher penalties for willful non-compliance. These figures will be adjusted for inflation.
The IRS and U.S. Treasury Department will also be obligated to publish annual public summaries that track the investments and economic performance of the designated communities compared to other non-designated areas to allow for an assessment of the program’s effectiveness.
As the new OBBBA QOZ program evolves, investors and developers are presented with a renewed framework that emphasizes long-term outcomes, data-driven oversight and rural revitalization. Navigating these changes requires not only a clear understanding of the new legislation, but also careful consideration of how the changes may impact specific investment strategies. Investors are strongly encouraged to consult with qualified legal and tax professionals to maximize the benefits and adhere to compliance of the newly revised program.
At Old Republic Title, we are committed to supporting QOZ stakeholders with comprehensive title insurance and settlement services. Whether you're launching a new project or expanding your investment portfolio, our team is ready to facilitate a secure and efficient transaction. We have a nationwide network of professionals ready to assist you. To learn more about our National Commercial Services team or find a location near you, visit oldrepublictitle.com/commercial/ncs/.
The information addressed herein is current as of September 24, 2025. Old Republic Title, its officers and employees do not provide, and this communication is not intended to be, investment, tax or legal advice. Old Republic Title makes no representations or warranties regarding the accuracy of the information or tax consequences addressed herein. You should consult an investment, tax or legal professional of your choosing to advise you of the benefits and risks of your specific transaction.
