“The One, Big, Beautiful Bill” Draft Released by House Republicans, What It Means For Opportunity Zones
The One Big Beautiful Bill significantly reforms and expands the Opportunity Zone (OZ) program. Here’s a breakdown of what changes and what stays the same, organized by key elements:
Timeline & Designation
Current Law | One Big Beautiful Bill |
OZ designations end December 31, 2026 | A new round of OZ designations starts January 1, 2027–2033 |
No provision for reauthorization | Reauthorizes and expands OZs, especially in rural areas |
No specific rural designation | Requires ≥33% of new OZs to be in USDA-defined rural areas |
Capital Gain Deferral and Exclusion
Current Law | One Big Beautiful Bill |
Temporary deferral of capital gains through 2026 | Extends deferral for new gains invested in 2027–2033 OZs |
10% step-up after 5 years (if invested by end of 2021) | Retains 10% step-up after 5 years—adds 30% for rural OZs |
Gains must be capital gains | Adds ordinary income deferral (up to $10,000 per year) |
Substantial Improvement Requirement
Current Law | One Big Beautiful Bill |
Must double the basis of acquired property | For rural OZs, improvement threshold reduced to 50% |
Applies uniformly to all zones | Rural OZs get relaxed standards, easing redevelopment |
Compliance and Transparency
Current Law | One Big Beautiful Bill |
Very limited reporting or public data | Requires annual reporting by QOFs and OZ businesses |
No penalties for non-compliance | Up to $50,000/year penalty for large QOFs that don't comply |
No tract-level transparency | Public disclosure by census tract, job impact, investment type |
Fund Types and Flexibility
Current Law | One Big Beautiful Bill |
Only “Qualified Opportunity Funds” (QOFs) | Adds “Qualified Rural Opportunity Funds” (QROFs) with enhanced tax benefits |
No income restrictions | Continues to allow high-income investors to participate |
OZBs must meet 70% tangible property test | Maintains core structure but adds more guidance and enforcement |
Investor & Policy Implications
More favorable to long-term investors: especially those targeting rural, infrastructure, or data center projects.
Improves oversight: responding to bipartisan criticism that the original OZ framework lacked transparency and accountability.
Broadens eligible capital: by allowing ordinary income deferral, not just capital gains.
Encourages rural development: through relaxed improvement rules and greater basis exclusion (30%).
