Notice of Transition: Opportunity Zone 1.0 to Opportunity Zone 2.0

The Opportunity Zone (OZ) Program was established under the Tax Cuts and Jobs Act of 2017 to encourage the reinvestment of capital gains into economically distressed communities. The Opportunity Zone Program was originally scheduled to sunset on December 31, 2026. The program offers preferential federal tax treatment for capital gains invested in qualified projects located within designated low-income census tracts.

Eligible investments may include new real estate construction, rehabilitation of vacant or underutilized properties, equity investments in operating businesses, and infrastructure or energy-related projects, among others. The Opportunity Zone incentive is designed to reward long-term, patient capital that generates sustained economic growth, job creation, and community revitalization in historically underserved areas.

With the passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, the program is now a permanent part of the federal tax code. As part of this legislation, a new round of Opportunity Zone census tract designations has begun.

Effective January 1, 2027, the Opportunity Zone (OZ) program shifts from its original framework (OZ 1.0) to an expanded, permanent structure under OZ 2.0.

1. Key Timeline and Map Overlap

• January 1, 2027: OZ 2.0 officially begins with newly designated, data-updated census tract maps.

• 2027 through 2028: A mandatory two-year transition window opens where OZ 1.0 and OZ 2.0 maps coexist.

• December 31, 2028: Original 2018 OZ 1.0 tracts officially sunset and expire.

2. Treatment of Existing Investments

• Grandfathered Status: Legacy capital deployed in OZ 1.0 tracts remains protected and eligible for the 10-year gain exclusion.

• December 31, 2026 Milestone: The deferred tax on original OZ 1.0 capital gains is recognized on this date and cannot be deferred again using OZ 2.0.

• New Deployment: After December 31, 2028, new investments must sit within a newly designated OZ 2.0 tract to qualify for tax benefits.

Once the new census tracts designations are final, Riverside County will update all materials and maps concerning this program.

For further information please visit one of the sites below:

California Opportunity Zone 2.0 program webpage: https://business.ca.gov/resources/infrastructure-development/opportunity-zones-in-california/

US Housing and Urban Development:

https://www.hud.gov/opportunity-zones/updates

Opportunity Zones.com:

https://opportunityzones.com/2025/07/ozp-353-oz2-explained/om/2025/07/ozp-353-oz2-explained/