The OZ reference site written by someone who does the deals.

A designated census tract where investors can receive federal tax benefits by reinvesting eligible capital gains through a Qualified Opportunity Fund (QOF) within 180 days of realizing the gain.

The original capital gains tax is deferred until the end of a statutory deferral period. Under OZ 1.0, that deadline is December 31, 2026, with tax due in April 2027. Under OZ 2.0, gains invested on or after January 1, 2027 are deferred for a rolling five years from the investment date.

If an investor holds a qualifying OZ investment for at least 10 years, all post-investment appreciation is excluded from federal capital gains tax. Depreciation recapture is also eliminated, not deferred, at exit through a fair market value basis step-up.

The One Big Beautiful Bill Act (OBBBA), enacted in 2025, made the OZ program permanent, introduced a 10% basis step-up for standard investments and a 30% basis step-up for rural zones, tightened zone eligibility criteria, and created new mandatory reporting requirements.

Start by asking whether the deal works on a pre-tax basis. Then ask about the capital stack, the sponsor's vertical integration, GP co-investment, and whether the fund has identified assets before raising capital.