Permanent Renewal and Enhancement of Opportunity Zones
Section 70421 · Sec. 70421 ·
What this chapter is about
This part makes opportunity zones a standing program. New zones are picked every ten years, starting July 1, 2026. The income test for a zone is tightened. Rural funds get a bigger break, and funds must file yearly returns.
“each July 1 of the year that is 10 years after the preceding decennial determination date under this subparagraph.”
The section amends section 1400Z-1(c)(2)(B) of the Internal Revenue Code of 1986 so that the determination period starts on the decennial determination date, and adds a new subparagraph (C) defining that date as July 1, 2026 and each July 1 ten years after the one before.
What the document actually says
“each July 1 of the year that is 10 years after the preceding decennial determination date under this subparagraph.”
That sentence, in plain words
The next date falls ten years after the last one. It is always a July 1.
What this is about
The first such date is July 1, 2026. New zones are picked from that date. The cycle then repeats every ten years.
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“by inserting "during any period" after "the number of population census tracts in a State that may be designated as qualified opportunity zones under this section", and”
The section inserts the words during any period into section 1400Z-1(d)(1) of the Internal Revenue Code of 1986 so that the cap on how many census tracts a State may designate applies to each period, makes the matching change in paragraph (2), and strikes the special rule for Puerto Rico in section 1400Z-1(b), which takes effect on December 31, 2026. The rest of the subsection takes effect on the date of enactment.
What the document actually says
“by inserting "during any period" after "the number of population census tracts in a State that may be designated as qualified opportunity zones under this section", and”
That sentence, in plain words
Three words are added to a rule on how many zones a state may name. They are during any period.
What this is about
So the cap resets each ten year cycle. A special rule for Puerto Rico is struck. That strike starts on December 31, 2026.
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“The term `low-income community' means any population census tract if--”
The section rewrites the opening of section 1400Z-1(c) of the Internal Revenue Code of 1986 so that a low-income community is a census tract whose median family income does not exceed 70 percent of the statewide median outside a metropolitan area, or 70 percent of the metropolitan area median inside one, or that has a poverty rate of at least 20 percent together with a median family income no more than 125 percent of the relevant median.
What the document actually says
“The term `low-income community' means any population census tract if--”
That sentence, in plain words
The term covers a census tract that meets one of two tests. Those tests follow below.
What this is about
One test is income at 70 percent of the local median or less. The other pairs a 20 percent poverty rate with income under 125 percent. A tract needs only one of them.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70421 in the PDF
What the document says
“A designation as a qualified opportunity zone shall remain in effect for the period beginning on the applicable start date and ending on the day before the date that is 10 years after the applicable start date.”
The section rewrites the redesignated subsection (e) of section 1400Z-1 of the Internal Revenue Code of 1986 so that a designation runs from the applicable start date to the day before the tenth anniversary of it, with the applicable start date being the January 1 after the zone was certified and designated by the Secretary. It also strikes the rule for contiguous census tracts. These changes apply to areas designated after enactment.
What the document actually says
“A designation as a qualified opportunity zone shall remain in effect for the period beginning on the applicable start date and ending on the day before the date that is 10 years after the applicable start date.”
That sentence, in plain words
A zone stays a zone for ten years. The clock starts on a set date. It ends the day before the tenth year is up.
What this is about
That start date is the January 1 after the zone is named. A rule on next-door tracts is struck. The changes reach zones named after this law.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70421 in the PDF
What the document says
“Gain to which subsection (a)(1)(B) applies shall be included in gross income in the taxable year which includes the earlier of--”
The section rewrites section 1400Z-2(b) of the Internal Revenue Code of 1986 so that deferred gain is counted in the taxable year that includes the earlier of the date the investment is sold or exchanged and the date five years after the investment was made. The amount counted is the lesser of the gain deferred and the fair market value of the investment on that date, minus the taxpayer's basis, which is zero except as the section provides. It also removes the sunset on the deferral election.
What the document actually says
“Gain to which subsection (a)(1)(B) applies shall be included in gross income in the taxable year which includes the earlier of--”
That sentence, in plain words
The gain must be counted in one tax year. That is the year holding the earlier of the two dates below.
What this is about
One date is when the investment is sold. The other is five years after it was made. Whichever comes first is used.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70421 in the PDF
What the document says
“the basis of such investment shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund) of the amount of gain deferred by reason of subsection (a)(1)(A).”
The section raises the basis of an investment held at least five years by 10 percent of the gain deferred, or 30 percent where the investment is in a qualified rural opportunity fund, and treats that increase as occurring before the five year inclusion date.
What the document actually says
“the basis of such investment shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund) of the amount of gain deferred by reason of subsection (a)(1)(A).”
That sentence, in plain words
The value on the books rises after five years. The rise is 10 percent of the gain put off. For a rural fund it is 30 percent.
What this is about
A higher basis means less gain to tax. The rural rate is three times the normal one. The rise counts before the gain is brought in.
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“The term `qualified rural opportunity fund' means a qualified opportunity fund that holds at least 90 percent of its assets in qualified opportunity zone property which--”
The section defines a qualified rural opportunity fund as a qualified opportunity fund holding at least 90 percent of its assets in qualified opportunity zone property that is business property used substantially all of the holding period in a zone made up entirely of a rural area, or stock or a partnership interest in a qualified opportunity zone business meeting the same test.
What the document actually says
“The term `qualified rural opportunity fund' means a qualified opportunity fund that holds at least 90 percent of its assets in qualified opportunity zone property which--”
That sentence, in plain words
The fund must hold at least 90 percent of its assets in zone property. The tests that follow say which property counts.
What this is about
The property must sit in a zone that is all rural. That holds for most of the time the fund holds it. Stock in such a business also counts.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70421 in the PDF
What the document says
“in the case of an investment sold before the date that is 30 years after the date of the investment, the fair market value of such investment on the date such investment is sold or exchanged, or”
The section rewrites section 1400Z-2(c) of the Internal Revenue Code of 1986 so that where the taxpayer elects, the basis of the investment is its fair market value on the date it is sold, if sold within 30 years of the investment, and otherwise its fair market value on the date 30 years after the investment.
What the document actually says
“in the case of an investment sold before the date that is 30 years after the date of the investment, the fair market value of such investment on the date such investment is sold or exchanged, or”
That sentence, in plain words
The basis is the value on the day of sale. That is for an investment sold within 30 years.
What this is about
A basis equal to market value leaves no gain to tax. If the investment is held longer, the value at 30 years is used. The taxpayer must elect this.
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“is amended by inserting "(50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area (as defined in subsection (b)(2)(C)(ii))" after "the adjusted basis of such property".”
The section inserts words into section 1400Z-2(d)(2)(D)(ii) of the Internal Revenue Code of 1986 setting the substantial improvement test at 50 percent of adjusted basis for property in a zone made up entirely of a rural area. It also replaces the fixed December 31, 2017 acquisition dates in the property, stock and partnership interest tests with the applicable start date and a new applicable date term.
What the document actually says
“is amended by inserting "(50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area (as defined in subsection (b)(2)(C)(ii))" after "the adjusted basis of such property".”
That sentence, in plain words
New words are put into a rule on improving property. They set the test at 50 percent of the value on the books. That holds in a zone that is all rural.
What this is about
Elsewhere the test is higher. A lower test is easier to meet. Fixed dates in nearby rules are also replaced.
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The document says “shall”Who acts: qualified opportunity fundsHow: statuteSec. 70421 in the PDF
What the document says
“Every qualified opportunity fund shall file an annual return (at such time and in such manner as the Secretary may prescribe) containing the information described in subsection (b).”
The section adds a new section 6039K to subpart A of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 requiring every qualified opportunity fund to file an annual return giving its name, address and taxpayer identification number, whether it is a corporation or a partnership, the value of its total assets and of its zone property, details of each holding of zone stock or partnership interest including industry codes, census tracts, property values, residential unit counts and employment figures, details of the zone business property it holds, employment figures for its own trades or businesses, details of each person who disposed of an investment in it during the year, and anything else the Secretary requires. It must also furnish a statement to each person named in the return.
What the document actually says
“Every qualified opportunity fund shall file an annual return (at such time and in such manner as the Secretary may prescribe) containing the information described in subsection (b).”
That sentence, in plain words
Every such fund must file a return each year. The Secretary sets when and how. It must carry the details listed elsewhere.
What this is about
The return names the fund and what it holds. It gives the areas the property sits in. It gives rough job counts and who sold out that year.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70421 in the PDF
What the document says
“such person shall pay a penalty of $500 for each day during which such failure continues.”
The section adds a new section 6726 to part II of subchapter B of chapter 68 of the Internal Revenue Code of 1986 imposing a penalty of $500 a day where a person required to file under section 6039K fails to file a complete and correct return on time and in the manner prescribed. The maximum for any one return is $10,000, or $50,000 where the fund's gross assets on the last day of the taxable year exceed $10,000,000. Where the failure is due to intentional disregard the daily figure becomes $2,500 and the caps become $50,000 and $250,000. The figures rise with prices for returns due in a calendar year after 2025.
What the document actually says
“such person shall pay a penalty of $500 for each day during which such failure continues.”
That sentence, in plain words
The fine is $500 for each day the failure goes on.
What this is about
One return may not draw more than $10,000. For a large fund the cap is $50,000. A failure on purpose costs five times as much.
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The document says “shall”Who acts: Secretary of the Treasury, Internal Revenue ServiceHow: statuteSec. 70421 in the PDF
What the document says
“there is appropriated, out of any money in the Treasury not otherwise appropriated, $15,000,000, to remain available until September 30, 2028, for necessary expenses of the Internal Revenue Service to make the reports described in paragraph (2).”
The section appropriates $15,000,000, available until September 30, 2028, for the Internal Revenue Service to make the reports, and requires the Secretary of the Treasury to publish a report on qualified opportunity funds as soon as practical after enactment and annually after that.
What the document actually says
“there is appropriated, out of any money in the Treasury not otherwise appropriated, $15,000,000, to remain available until September 30, 2028, for necessary expenses of the Internal Revenue Service to make the reports described in paragraph (2).”
That sentence, in plain words
Fifteen million dollars is set aside. It can be spent through September 30, 2028. It pays the tax agency to make the reports.
What this is about
The reports must be made public. The first comes as soon as it can. After that one comes each year.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70421 in the PDF
What the document says
“The report required under paragraph (2) shall include, to the extent available, the following information:”
The section requires the report to cover, so far as available, the number of qualified opportunity funds, the total assets they hold, the total invested by industry code, the share of designated tracts that received investment, rough employment figures for each tract, the split between real property and other zone property, the number of residential units resulting from investment in each tract, and the total invested in each tract. From the sixth year the report must also cover the impacts and outcomes of designation as measured by job creation, poverty reduction, new business starts and other metrics, with further information in the sixth and eleventh years. Return information that could identify a person is protected.
What the document actually says
“The report required under paragraph (2) shall include, to the extent available, the following information:”
That sentence, in plain words
The report must carry the things listed below. It must do so as far as the data allows.
What this is about
It counts the funds and what they hold. It shows how much went into each area. It gives rough job counts. Names and private details are kept out.
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The document says “shall apply”Who acts: Secretary of the TreasuryHow: statuteSec. 70421 in the PDF
What the document says
“Except as otherwise provided in this paragraph, the amendments made by this subsection shall apply to amounts invested in qualified opportunity funds after December 31, 2026.”
The section applies the capital gains changes to amounts invested in qualified opportunity funds after December 31, 2026, applies the acquisition date changes to property acquired after that date, makes the rural improvement change effective on enactment, and applies the reporting changes to taxable years beginning after enactment.
What the document actually says
“Except as otherwise provided in this paragraph, the amendments made by this subsection shall apply to amounts invested in qualified opportunity funds after December 31, 2026.”
That sentence, in plain words
The changes reach money put into these funds after December 31, 2026. Some parts start sooner.
What this is about
The rural improvement change starts at once. The reporting rules start with the next tax year. Each date is fixed in the law.
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Provide for reconciliation pursuant to title II of H. Con. Res. 14, Public Law 119-21, sec. 70421, 139 Stat. 223 (2025). https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
This page
“Permanent Renewal and Enhancement of Opportunity Zones,” Provide for reconciliation pursuant to title II of H. Con. Res. 14, section 70421. Read the Mandate, https://readthemandate.org/pl-119-21/section-70421/ (retrieved August 26, 2026).
Cite the document when the claim is about what the document says. Cite this page when the indexing, the wording or the record of what has happened is what is being relied on.
What This Page Covers, and What It Leaves Out
Each distinct thing the section does: set a ten year cycle of designations, drop the Puerto Rico rule and limit designations per period, tighten the low-income community test, set a ten year life for a designation, change how deferred gain is brought into income, raise basis after five years with a bigger rise for rural funds, define a qualified rural opportunity fund, rewrite the ten year hold rule with a thirty year cap, cut the improvement threshold in rural zones, require annual returns from funds, set penalties for failing to file, and fund and require public reports.
The full list of items a fund must report and the full list of items the public report must carry, which are carried in summaries rather than recorded one by one. The clerical amendments are also not recorded.
The section works by amending sections 1400Z-1 and 1400Z-2 and adding sections to the Internal Revenue Code of 1986, none of which is indexed here, so how the program otherwise works cannot be checked against anything on this site.
