Key insights
- Opportunity Zones (OZ) remain a significant tax planning tool for investors, developers, and operating businesses seeking to defer and reduce capital gains while promoting economic activity in designated communities.
- Updated census maps don’t change which properties qualify — an essential point for investment, underwriting, and compliance.
- Beginning January 1, 2027, newly designated OZ 2.0 tracts will come online while the original OZ 1.0 tracts continue through the end of 2028, creating a temporary period in which both sets of zones coexist.
- With no federal guidance yet on the interaction between OZ 1.0 and OZ 2.0, investors, developers, and operating businesses need to document their assumptions, model different outcomes, and get ready for possible shifts in policy.
Take a closer look at Opportunity Zone planning needs.
For many Opportunity Zone (OZ) investors and Qualified Opportunity Fund (QOF) managers, the next few years won’t just be about tax benefits — they’ll be about timing, documentation, and defensible decisions.
With a transition period on the horizon and limited federal guidance so far, choices made today could shape how much flexibility you have later, especially around compliance, reporting, and eventual exit options.
This is a moment where clarity matters — not just on what the rules say, but on how they apply to your specific project, fund structure, or investment timeline.
Learn why the original and future designations interact is essential for OZ investment planning, QOF operations, and project execution.
Background: Opportunity Zones and changing census tracts
OZ designations were originally established in 2018 based on then‑existing census tract boundaries. Although the 2020 Census introduced renumbering and boundary updates, the IRS confirmed OZ eligibility continues to follow the original 2018 tract lines. Updated census maps alone don’t change a tract’s OZ status.
Separately, OZ 2.0 legislation introduced a permanent framework with redesignations every 10 years beginning January 1, 2027.
Planning through the OZ transition
As the program evolves, a unique overlap period is approaching: from January 1, 2027 through December 31, 2028, the original OZ 1.0 tracts are understood to continue to qualify even as the new OZ 2.0 framework begins.
This two‑year transition raises important questions about the treatment of legacy tracts, updated census boundaries, and strategic planning considerations for long‑term compliance and benefits.
If you’re actively managing or considering an OZ investment, consider:
- How confident are you in the way your project qualifies today — and how that position will hold up under future review?
- Are your fund and operating documents aligned with how the transition period is likely to unfold?
- If timelines shift or guidance changes, do you have room to adjust without disrupting financing, reporting, or investor expectations?
Current interpretation: Continuing validity of OZ 1.0 tracts
In practice, industry professionals continue to use the original OZ 1.0 boundaries when confirming eligibility for opportunity zone property.
Although no statutory sunset date explicitly ends OZ 1.0 designations on December 31, 2028, most planning focuses on two milestones:
- Recognition of deferred OZ 1.0 capital gains in 2026
- The start of OZ 2.0 designations in 2027
Current law doesn’t tie OZ eligibility to updated census tracts. Regulations reference the original 2018 boundaries, and absent new IRS or Treasury guidance, the prevailing view is OZ 1.0 tracts remain valid through at least the end of 2028, even when later census updates have split, merged, or renumbered those tracts.
Key uncertainty: Interaction between OZ 1.0 and OZ 2.0
The largest unresolved issue is how the original OZ 1.0 tracts will interact with newly designated OZ 2.0 tracts starting in 2027. With no additional guidance issued to date, the market anticipates continued OZ 1.0 validity during the overlap period.
As the 2026 inclusion deadline approaches, investors are increasingly focused on mitigating compliance risks and preserving predictability.
The transition may affect planning for:
- Substantial improvement requirements
- QOF 90% asset tests
- “Substantially all” use thresholds
- Reporting, compliance, disclosure, and exit strategies
Requests for federal guidance
Stakeholders have submitted formal requests seeking clarification on:
- Whether OZ 1.0 status continues after census tract renumbering or boundary changes
- Whether reconfigured tracts may inherit legacy OZ designation
- How long OZ 1.0 tracts qualify during and after the 2027 redesignation cycle
Until the IRS or Treasury issue updated guidance, taxpayers should carefully document interpretive positions, stress test planning scenarios, and adopt a thoughtful strategy for navigating the transition period. test planning scenarios, and adopt a thoughtful strategy for navigating the transition period.
How CLA can help with Opportunity Zone planning
Opportunity Zones were designed to encourage long‑term investment, but long‑term strategies still need to adapt as rules evolve. With overlapping designations, shifting census data, and unanswered questions around the transition to OZ 2.0, many investors are taking a closer look at how their current approach holds up under different scenarios.
CLA’s tax professionals can help investors and Qualified Opportunity Fund managers evaluate eligibility questions arising from census‑tract updates, model the implications of the 2026 inclusion year, and prepare for OZ 2.0’s enhanced reporting and redesignation requirements. If you’re weighing how these changes intersect with an existing or planned OZ investment, a brief conversation can help clarify your next steps.