Opportunity Zones

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Description

Opportunity Zones 2.0 (effective 2027-2036)

Opportunity Zones (OZs) are federally designated, economically distressed census tracts that attract private investment through capital-gains tax incentives. Investors who reinvest their gains into Qualified Opportunity Funds (QOFs), which finance businesses, housing, or infrastructure within designated zones, can reduce and defer capital-gains taxes and eliminate taxes on new appreciation if they hold the investment long enough. 

The goal is to channel long-term capital into communities that have the potential for growth but struggle to access traditional financing.

How Opportunity Zone Investments Work 

Investors who realize a capital gain from the sale of an asset, such as real estate, stock, or a business, can reinvest that gain into a QOF within 180 days. 

When they do: 

  • Deferral: Taxes on the original gain are deferred for up to five years. 
  • Reduction: Investors receive a 10% step-up in basis after five years, reducing the taxable portion of the original gain. 
  • Exclusion: If the investment is held for 10 years or longer, any appreciation on the new investment is tax-free. 

QOFs can finance a wide array of projects, ranging from startup operations and commercial developments to adaptive reuse of existing buildings, so long as they meet federal guidelines for eligible property and substantial improvement.

What’s New Under Opportunity Zones 2.0

Congress updated the program through the One Big Beautiful Bill Act in 2025, making it a permanent feature of the U.S. tax code requiring that OZs be redesignated every 10 years as eligibility data is updated and adding new benefits for rural and long-term investments. 

  1. Rolling Five-Year Deferral Window: Investors can now roll capital gains into QOFs at any time. Each investment receives its own five-year deferral period, replacing the previous fixed deadline system. 
  2. Enhanced Rural Benefits: A new category of Qualified Rural Opportunity Funds (QROFs) triples the step-up benefit, providing a 30% basis increase after five years for investments in qualifying rural zones. Defines a “rural area” as any area other than: 
    1. A city or town with a population of greater than 50,000 and 
    2. An urbanized area adjacent to a city or town with a population in excess of 50,000. 

Additionally, rural projects now only need to meet a 50% substantial-improvement test instead of the full 100% requirement, allowing more flexible project rehabilitation (The 50% rule is already in effect).

Qualified Opportunity Zones designated under the original program remain designated through December 31, 2028. Under the Opportunity Zones 2.0 framework, new designations are expected to take effect January 1, 2027, resulting in a two-year overlap (2027–2028). This page will be updated as the U.S. Department of the Treasury and the Internal Revenue Service issue additional guidance on how federal rules apply during the overlap period. 

Do I Qualify?

Opportunity Zones 2.0 (effective 2027-2036)

Low-income communities are defined as census tracts that satisfy one of the following tests: 

  1. A median family income below 70% of the state (for non-metro areas) or metro (for metro areas) median (versus 80% in the original OZ provision). 
  2. A poverty rate of 20% or greater plus a median family income below 125% of the state or metro median. 

Defines a “rural area” as any area other than: 

  1. A city or town with a population of greater than 50,000 and 
  2. An urbanized area adjacent to a city or town with a population in excess of 50,000. 

Additionally, rural projects now only need to meet a 50% substantial-improvement test instead of the full 100% requirement, allowing more flexible project rehabilitation (The 50% rule is already in effect).

The “contiguous tract” provision has been removed. Governors may nominate up to 25% of eligible tracts. Preliminary interactive mapping tools are available here: Novogradac OZ 2.0 Mapping Tool

How Do I Apply?

Opportunity Zones 2.0 (effective 2027-2036)

The Missouri Department of Economic Development is finalizing a statewide nomination process to receive input from state, regional, and local stakeholders and to identify eligible Census tracts for Opportunity Zone designation consideration. Once federal eligibility guidance is finalized, Missouri will publish instructions, timelines, and required submission materials on this page.

The federal Opportunity Zone program is administered by the U.S. Department of the Treasury and the Internal Revenue Service. Federal program information and guidance are available at Opportunity zones | Internal Revenue Service

Need Help?

Opportunity Zones 2.0 (effective 2027-2036)

Please email OpportunityZones@ded.mo.gov if you should have any questions or need technical assistance.  If you have tax related questions, please work with a CPA in your area that is familiar with the Opportunity Zone program.

Documents

Opportunity Zones Program Summary

Opportunity Zones 1.0 (effective 2018 – 2028)

Description

The Opportunity Zones program encourages long-term investment and job creation in low-income areas of the state, by allowing investors to re-invest unrealized capital gains in designated census tracts. The state of Missouri submitted 161 Opportunity Zones to the federal government for inclusion in the program.

Opportunity Zones are low-income census tracts in which:

  • (1) The tract has a poverty rate of at least 20%; or
  • (2)(A) For a census tract in a metropolitan area, the tract’s median family income does not exceed 80% of the greater of (A) the metropolitan area median family income or (B) statewide median family income; or
  • (2)(B) For a census tract in a non-metropolitan area, the tract does not exceed 80% of the statewide median family income.  However, in the case of a census tract located within a high migration rural county, low-income is defined by reference to 85% of statewide median family income.
    • A “high migration rural county” is any rural county that, during the 20-year period ending with the year in which the most recent census was conducted, has a net outmigration of inhabitants from the county of at least 10% of the county population at the beginning of such period.

What is an Opportunity Fund?

An Opportunity Fund is any investment vehicle organized as a corporation or partnership for the purpose of investing in Opportunity Zones that holds at least 90% of its assets in qualified Opportunity Zone assets.

What is the benefit of an Opportunity Zone?

Certain eligible investments made by U.S. investors, including the reinvestment of unrealized capital gains into Opportunity Funds made inside designated Opportunity Zones, may gain favorable tax treatment and tax incentives, such as temporary deferrals for the investor.

What is the purpose of an Opportunity Zone?

To drive needed capital into distressed communities.

Do I Qualify?

In order to find out if your property is located in an Opportunity Zone, please visit the Interactive Opportunity Zones Map – this map may be utilized in order to find out if your property is located in a Designated Opportunity Zone.

How Do I Apply?

Please note that the U.S. Department of Treasury Administers the Federal Opportunity Zone Program.  Information for the final rules and regulations of the program may be found at https://home.treasury.gov/news/press-releases/sm864. 

Need Help?

Please email OpportunityZones@ded.mo.gov if you should have any questions or need technical assistance.  If you have tax related questions, please work with a CPA in your area that is familiar with the Opportunity Zone program.

Program Documents