The 2017 tax revision (P.L. 115-97) temporarily authorized Opportunity Zone (OZ) tax incentives, which are intended to encourage private investment in economicallydistressed communities. OZ tax incentives are allowed for investments held by Qualified Opportunity Funds (QOFs) in qualified OZs. In 2018, the Community Development Financial Institutions (CDFI) Fund in the Treasury Department designated qualified census tracts that are eligible for OZ tax incentives after receiving recommendations from head executives (e.g., governors) at the state level. Qualified OZ designations for census tracts are in effect through the end of 2026. OZ tax incentives include:
- a temporary tax deferral for capital gains reinvested in a QOF,
- a step-up in basis for any investment in a QOF held for at least five years (10% basis increase) or seven years (15% basis increase), and
- a permanent exclusion of capital gains from the sale or exchange of an investment in a QOF held for at least 10 years.
On December 7, 2020, the Government Accountability Office released the report Tax Incentives for Opportunity Zones
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