The Qualified Opportunity Zone (“QOZ”) program was created by the 2017 Tax Cuts and Jobs Act to encourage economic growth in underserved communities through tax incentives for investors who utilize “Opportunity Funds” to invest in the Zones. Along with tax benefits, it presents opportunities for real estate investment and development in those communities. U.S states and territories, including Washington, D.C., nominated areas to be designated as QOZs in 2018, and the IRS and Treasury finalized the designations that year. The U.S. Treasury Department and the Internal Revenue Service are currently conducting notice-and-comment rulemaking to finalize regulations for the program. This is a temporary program, set to fully sunset on December 31, 2047.

There are multiple tax benefits available to investors who invest in a QOZ, if all the requirements are met. First, capital gains reinvested within 180 days into a QOZ are tax-deferred for up to nine years, through 2026. If the new investment (to which the capital gains were rolled into), the tax ultimately paid on it is reduced by 10%; if held for seven years, it is reduced by 15%. In addition, gains accrued on investments in a QOZ are free of capital gains tax if they are held for at least ten years. These investments must be processed through an “Opportunity Fund,” which is a partnership or a corporation organized for the purpose of investing in QOZ property; these funds self-certified, and must hold at least 90% of their assets in QOZ property (which includes stock, partnership interests, and/or tangible property used in a trade or business in a QOZ, such as real estate).

Political Advocacy

Current Legislation/Regulation

Treasury and IRS Final Regulations (December 2019)


Letters to federal agencies
Issue summary
NAR Federal Issues Tracker

Legislative Contact(s):

Evan Liddiard

Erin Stackley

Joe Harris

Regulatory Contact(s):

Evan Liddiard

What is the fundamental issue?

The Qualified Opportunity Zones (“QOZ”) program was enacted in the 2017 Tax Cuts and Jobs Act to encourage economic growth in underserved communities through tax incentives for investors. By offering tax benefits to investors, the program presents opportunities for real estate investment and development in those communities. U.S. states and territories, including Washington, DC, nominated areas (by census tract) to be designated as QOZs in 2018, and the IRS and Treasury finalized the designations that year. This temporary program is set to expire on December 31, 2047.

There are several potential tax benefits to investors who invest in a QOZ, if all requirements are met:

  • First, capital gains reinvested (within 180 days of a sale to a nonrelated person) into a QOZ are tax-deferred as long as they are held in the program, through 2026.
  • If the new investment is held for five years, the tax ultimately paid on the reinvested gains is reduced by 10%; if held for seven years, that reduction is increased to 15%.
  • In addition, gains accrued on the new investment in a QOZ are free of future capital gains tax if they are held for at least ten years.

Investments in O Funds may be gains rolled over from a previous sale (within 180 days) and/or non-capital gains funds, but only reinvested capital gains are eligible for the tax benefits. If both gains and non-gains funds are invested, they are treated as separate investments and will receive different tax treatments.

To qualify for the tax benefits, investments into a QOZ must be made through an “Opportunity Fund” (O Fund), which may be a partnership or corporation organized for the purpose of investing in QOZ property. The requirements for an O Fund are:

  • Must hold at least 90% of assets in QOZ property (which can be stock, partnership interests, and/or tangible property used in a trade or business within a QOZ, such as real estate);
  • Must certify with the Treasury and IRS, via a self-certification filed with federal tax returns (Form 8996).

Finally, the “QOZ business property” that an O Fund invest in must be “substantially all” in a QOZ, which under the proposed rules is met if 70% or more of the property is in a QOZ. The statute also requires that after an O Fund acquires QOZ business property that it be either "original use" (new) or “substantially improved,” which means investing at least as much on the improvement as was paid for the used asset. "Original use" commences with depreciation, so an unfinished asset purchase by an O Fund in a QOZ can qualify for original use as long as it has not been depreciated yet. In addition, vacant/abandoned property can be considered original use if it has been in that state for at least five years. The proposed rules state that the basis of the land a business sits on does not need to be included for the substantial improvement requirement, thus reducing the required investment amounts.

I am a real estate professional. What does this mean for my business?

The QOZ program presents multiple opportunities for real estate professionals. On the front end, it provides a way for investors to redeploy investments in capital assets without paying the tax on any gains immediately, which may encourage them to sell real estate assets they might otherwise hold on to in order to avoid taxes. On the back end, the Opportunity Funds created to invest in the zones will be looking for business property in which to invest, which in many cases will include real property and/or involve development opportunities for real estate.

NAR Policy

NAR supports tax policies that provide the deferral and/or the exclusion of capital gains taxes on investments that are sold if the proceeds are reinvested into low-income or economically disadvantaged communities or neighborhoods that have been officially designated as eligible to receive such tax-incentivized funds.

Legislative/Regulatory Status/Outlook

The Treasury released the first set of proposed rules for QOZs in October 2018, which outlined several administrative aspects of the program.  An IRS public hearing was held in February 2019 focusing on feedback from stakeholders and industry groups on those first proposed rules. A second round of proposed rules were released on April 17, 2019, which provide more in-depth details on the program and clarity on its administration. The Treasury Department has stipulated that the proposed rules are to be treated as effective to allow participation in the program to go forward until final regulations are out.  In addition, agency "requests for information" were put out in April by the Department of Housing and Urban Development as well as the Treasury Department and the IRS, seeking feedback from stakeholders on data reporting requirements for the program.  

On December 12, 2018, the White House issued an Executive Order establishing the White House Opportunity and Revitalization Council, chaired by Housing and Urban Development (HUD) Secretary Ben Carson and comprised of 13 Federal agencies. The Council will focus on ways to revitalize low-income communities, through streamlining coordinating existing Federal programs to economically distressed areas, including Opportunity Zones. In May 2019 HUD released a notice that it will be offering new incentives for multifamily property owners to invest in Opportunity Zones.

Final rules for the program were released at the end of 2019, and they have provided some much-needed certainty for many investors who were waiting for them.  In October 2019 the IRS announced it had drafted a form to collect information on Opportunity Funds, to help track whether investors in O Funds are complying with the law. In the 116th Congress, Senators Tim Scott (R-SC) and Cory Booker (D-NJ) introduced bill in the Senate (S. 1344) which would impose stronger reporting requirements, and which would aid in tracking investments into Opportunity Zones and evaluating the effectiveness of the program. 


NAR Opportunity Zone Toolkit

NAR Committees:

Commercial Federal Policy Committee

Federal Taxation Committee


NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require a password.

QOZ At-a-Glance 1300w

From NAR

Coalition Letter to Secretary of the Treasury (National Association of REALTORS®, Mar. 17, 2020)

Qualified Opportunity Zones Toolkit (National Association of REALTORS®, Summer 2019) – A resource for Associations to use as they work with state and local Economic Development Organizations, Opportunity Funds, and their membership to plan and implement development in QOZs.


Final Rules Issued on Qualified Opportunity Zones (National Association of REALTORS®, December 20, 2019)

Opportunity Zones Frequently Asked Questions (Internal Revenue Service, Dec. 15, 2020) — These FAQs (and answers) help to explain opportunity zones and give links to the IRS notices and resources for opportunity zones.

Final Regulations Issued Implementing Opportunity Zones Tax Incentive (Journal of Taxation of Investments, 2020) E

Qualified Opportunity Zones Background (National Association of REALTORS®, Fall 2018) – General questions, and links to additional resources, including a list of designated QOZs, a map of QOZs, and proposed rules by the Treasury.

Webinar: Capitalizing on Opportunity Zones and Section 199A (National Association of REALTORS® - login required) — NAR representatives discuss how these two new developments will affect the commercial real estate industry.

Opportunity Zones Proposed Rules Released (NAR Washington Report, Oct. 26, 2018) — explains that the Treasury Department released proposed rules for the Qualified Opportunity Zones program.

Trump Administration Unveils New Rules for Opportunity Zones (HousingWire, Oct. 22, 2018) — explains the Opportunity Zone tax breaks for investors, but it also links (at the bottom of the article) to the IRS’s guidance for Opportunity Zone Funds.

Real Estate & Passthrough Corner: Real Estate Finance Post-Tax Reform: New Markets Tax Credit, Rehabilitation Tax Credit and Qualified Opportunity Zones — (Journal of Passthrough Entities, May/Jun. 2018) — Offers a great flow-chart about how to set up Qualified Opportunity Funds and how those invest in Qualified Opportunity Zones. E

Locating QOZs

Map of Opportunity Zones (Department of Housing and Urban Development, 2021)

Treasury, IRS Issue Proposed Regulations on New Opportunity Zone Tax Incentive (Internal Revenue Service, Oct. 19, 2018) — Includes a list that can be useful for understanding what Opportunity Zones exist in your area.


10 Opportunity Zones that Saw Home Prices Nearly Double (REALTOR® Magazine, Nov 24, 2020)

Opportunity Zones: A Place-Based Incentive for Investment in Low-Income Communities (Cityscape: A Journal of Policy Development and Research, 2020) E

Be An Opportunity Zone Leader (REALTOR® Magazine, Oct. 30, 2019)

Ensuring Opportunity Zones Work for All (REALTOR® Magazine, May 15, 2019)

IRS Issues Guidance Relating to Deferral of Gains for Investments in a Qualified Opportunity Fund (Internal Revenue Service, Apr. 17, 2019)

Opportunity Zones Hype Overshadows Potential Pitfalls and Risks (National Real Estate Investor, Mar. 26, 2019) — This article discusses how the tax benefits can blind investors to the project's lack of viability and social impact.

Recent Developments & Observations: Qualified Opportunity Zones — A Boon With Uncertainty (Journal of Passthrough Entities, Sep./Oct. 2018) — Looks at the new qualified opportunity fund and how it raises some of the difficult questions that arise under the new law, including the restrictions on opportunity zone business growth, the hazy definition of “substantial improved property” to qualify for tax breaks in an opportunity zone, the amount of unqualified property an investor may hold in opportunity zone assets, and the disparity in the tax basis. E

Worth the Risk? Opportunity Zone Investments Can Come With Their Share of Pitfalls (National Real Estate Investor, Jul. 2018) — This article talks about the potential downfalls of investing in opportunity zones. E

Opportunity Zones: Vital Tool or Tax Windfall for Rich? (Washington Informer, Oct. 11, 2018) — This short article talks about African Americans can benefit from the Opportunity Zone program. E

Tax Breaks Open Up Opportunity Zones for Investors (REALTOR® Magazine Daily News, Oct. 22, 2018) – Investors could be eligible for significant tax breaks when purchasing property in distressed economic areas across the country that the U.S. Treasury Department has labeled “opportunity zones.”

Tax Reform Opens New Opportunities for Commercial Real Estate (REALTOR® Magazine, Nov. 2, 2018) – Changes to the way investors, landowners, and real estate professionals pay taxes have the potential to impact the commercial market.

Have an idea for a real estate topic? Send us your suggestions.

The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.