Dossier · Tax · Federal

Old opportunity zone gains come due December 31, 2026, while the new permanent zone map is drawn

Status
Open, tracking
Next deadline
December 31, 2026 (56 days)Deferred gain from original-regime fund investments is included in income, and the working capital plan for property in an expiring zone must be in place.
Last verified
October 29, 2026
Entries
6

Every dollar of gain deferred into an opportunity fund under the original program becomes taxable for the year that includes December 31, 2026. There is no sale to pay the bill. A fund or property LLC with investors who deferred gain in 2019 through 2026 is about to hand them a tax liability with no cash attached.

Congress made the program permanent in July 2025. Governors nominate new zones every ten years, and the first new map runs from January 1, 2027 through December 31, 2036. The test is stricter: a census tract must qualify as low-income on its own, and the old rule letting governors add neighboring tracts is gone. Rev. Proc. 2026-14 lists 25,332 eligible tracts, 8,334 of them entirely rural.

Gain deferred under the original opportunity zone program is taxed for 2026 whether or not the investment is sold.

The two maps overlap

The original zones stay designated through December 31, 2028, so 2027 and 2028 run on two maps. A project in an original zone that is not on the new map can still treat new property as qualifying after 2026 only if a working capital plan is in place by December 31, 2026, with 10% of the money received and 5% spent by then (Notice 2026-40). For investments after 2026, deferral lasts five years from the investment, basis steps up 10% after five years, or 30% in a qualified rural fund, and the fair market value election caps at 30 years.

The structuring consequence

A fund LLC with original-regime investors needs a distribution or a capital call sized to the 2026 tax, decided now, not at the April filing deadline. And the tract a deal sits in now decides the fund structure: a building that will not be on the new map needs its working capital plan executed before year end.

What we are watching

Treasury expects to publish the 2027 designated zones before January 1, 2027. State nomination periods closed between late September and October 28, 2026. Proposed regulations on fund reporting and decertification were published in September 2026, with a public hearing set for November 5, 2026.

Timeline

  1. Treasury proposes reporting rules for opportunity funds, including an exit that triggers investor gain

    The proposed regulations require qualified opportunity funds to file annual information returns and send investor statements, and require the businesses they invest in to report tract-level data. A fund that voluntarily decertifies triggers gain for its investors, who may keep deferral by reinvesting in another fund within 180 days. A public hearing is set for November 5, 2026.

    Reported by: Fox Rothschild · Verified Oct 29, 2026

  2. States begin nominating tracts for the first permanent opportunity zone map

    Governors of the states, territories and the District of Columbia began nominating tracts that become eligible for new investment on January 1, 2027. With the optional extension, the latest possible close was October 28, 2026, and Treasury expects to name the zones before January 1, 2027.

    Primary source: U.S. Treasury bulletin · Verified Oct 29, 2026

  3. The IRS confirms original-regime gains are taxed for 2026 and sets the transition rules

    Notice 2026-40 confirms deferred gain under the original program is included in income for the year that includes December 31, 2026. It announces a working capital exception that requires the plan, the 10% receipt and the 5% spend by that date, and proposes safe harbors treating expired zones as qualifying through December 31, 2047.

    Primary source: IRS Notice 2026-40 · Verified Oct 29, 2026

  4. Treasury publishes the rules for drawing the new map and lists 25,332 eligible tracts

    Rev. Proc. 2026-14 sets a 90-day nomination window starting July 1, 2026, with one optional 30-day extension. States may designate up to 25% of their low-income communities, and 8,334 of the eligible tracts are entirely rural.

    Primary source: IRS, IR-2026-45 · Verified Oct 29, 2026

  5. The IRS halves the substantial improvement test for rural opportunity zones

    Notice 2025-50 lowers the improvement threshold from 100% to 50% of basis for property in zones made up entirely of rural area, for improvements made on or after July 4, 2025. The IRS says 3,309 of the 8,764 current zones qualify.

    Primary source: IRS, IR-2025-96 · Verified Oct 29, 2026

  6. Congress makes opportunity zones permanent with ten-year designation rounds

    Section 70421 of Public Law 119-21 sets up new designations every ten years beginning January 1, 2027, a five-year deferral for investments made after 2026, a 10% basis step-up (30% for rural funds) and a 30-year cap on the fair market value basis election. Nominated tracts must now qualify as low-income communities on their own.

    Primary source: IRS Notice 2026-40 (statutory summary) · Verified Oct 29, 2026

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Opened October 29, 2026. Entries are dated by the event, not the write-up, and each links to its source. Education only; nothing here is legal or tax advice.

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