“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%).