OZ 2.0, in plain English.

The federal framework

For qualifying investments made from January 1, 2027, federal gain deferral generally ends after five years or upon an earlier inclusion event. A qualifying five-year hold brings a 10% basis increase; qualified rural opportunity funds have a separate 30% rule. IRS Notice 2026-40

The long-term benefit

After at least ten years, an eligible election can exclude qualifying investment appreciation from federal capital-gains tax. For post-2026 investments, the basis adjustment uses fair market value at sale or the 30-year anniversary, whichever is earlier. This does not erase the original deferred gain. IRS transitional guidance

Timing and location

New zones certified in 2026 take effect January 1, 2027. A typical reinvestment window is 180 days, with fact-specific starting dates and transition rules. Confirm both investor timing and project qualification before committing. IRS Notice 2026-40

Questions to resolve with your advisers

• Which gain is eligible, and when does the investment window begin?
• Which designation cycle and acquisition rules apply to the project?
• How will the investment be held, documented, and monitored?
• What cash will be available when tax on the original gain becomes due?
• How do state taxes and other investor circumstances affect the analysis?