Senate Passes Opportunity Zones 2.0 Legislation

Earlier today, the U.S. Senate passed H.R. 1, the One Big Beautiful Bill, which will make Opportunity Zones permanent. The bill now heads back to the House for final passage before going to President Trump for enactment.

The final Senate vote tally was 51-50, with Vice President JD Vance casting the tie-breaking vote.

OpportunityZones.com founder Jimmy Atkinson provided a breakdown of the key OZ 2.0 provisions included in the new reconciliation bill text during a live episode of The Opportunity Zones Podcast:

Key OZ 2.0 Provisions Included In H.R. 1

  • Permanent status. Opportunity Zone policy is no longer sunset-dated. It will become a standing component of the Internal Revenue Code.
  • Rolling five-year gain deferral. Any qualifying gain invested into an OZ fund after December 31, 2026 receives a five-year deferral.
  • New basis step-up schedule. Standard Qualified Opportunity Fund (QOF) investors receive a 10 percent basis step-up after five years; Qualified Rural Opportunity Fund (QROF) investors receive 30 percent.
  • Additional rural incentives. Rural OZ tracts (defined as areas outside cities or towns of 50,000 people or contiguous urbanized areas) also enjoy a lower 50 percent substantial-improvement threshold, versus the usual 100 percent.
  • Zone re-designations every decade. Governors must select new zones every 10 years starting July 1, 2026. New zones will go into effect every 10 years starting January 1, 2027.
  • Tighter census tract criteria. The “low-income community” threshold falls from 80 percent to 70 percent of area or statewide median family income, and the non-low-income contiguous tract exception disappears. Also of note, the special rule for Puerto Rico is stricken from the statute. The island loses its blanket designation, and now may only select up to 25 percent of eligible tracts, just like all other states.
  • Expanded reporting. Transparency measures, written to satisfy Byrd-rule revenue tests, kick in for tax years beginning in 2027.

Popular Policy Recommendations Not Included In H.R. 1

  • There is no extension of the current program for existing investors. The deferral date for investors through 2026 remains December 31, 2026. Current zones will expire on December 31, 2028.
  • Non-gains dollars are still ineligible for any of the tax benefits.
  • Operating businesses with tangible property will still find it difficult to qualify.
  • No fund-of-funds. Qualified Opportunity Funds are still not permitted to invest in other Qualified Opportunity Funds.
  • Additional affordable housing incentives did not come to fruition.

New Issues Created By H.R. 1

  • Dead zone issue. Investors with gains (particularly K-1 gains) in 2026 may be disincentivized to make a QOF investment in 2026 vs. 2027.
  • A smaller map of Opportunity Zones. The tighter census tract criteria discussed above would result in 22% fewer Opportunity Zones beginning in 2027. Senator Tim Scott’s amendment to restore the original “low-income community” definition to 80 percent AMI was ruled out of order by the Senate parliamentarian shortly before the bill text was finalized and passed.

About The Opportunity Zones Podcast

Hosted by OpportunityZones.com founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.

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Episode Summary

This special live edition of The Opportunity Zones Podcast opens with a floor-vote clip of Senator JD Vance announcing, “On this vote, the yeas are 50, the nays are 50. The Vice President votes in the affirmative. The bill, as amended, is passed.”

From there, host Jimmy Atkinson explains that the Senate has just approved H.R. 1, the “One Big Beautiful Bill” by a 51-50 margin, with Vice President Vance breaking the tie shortly before noon Eastern Time on July 1, 2025.

Because the Senate made substantial amendments, the package now returns to the House, where Republican leaders hope to clear it and place it on President Trump’s desk before their self-imposed July 4 deadline. Jimmy spends the hour-long episode walking listeners through everything the Senate added, everything it removed, why the legislation matters, and what investors should expect next. Plus, he answers live questions from the audience.

Historical Context & Timeline

  • November 2024: Donald Trump’s re-election (and concurrent GOP control of both chambers of Congress) sets the stage for a reconciliation bill.
  • February 2025: The House and Senate adopt budget resolutions containing reconciliation instructions.
  • April 2025: The Senate approves the House’s budget framework (H.Con.Res. 14).
  • May 2025: House Ways & Means releases its first draft of the tax title, including early Opportunity Zones (OZ) 2.0 language; the full House passes H.R. 1 on May 22.
  • June 16, 2025: Senate Finance issues its initial amendment, which is a substantial rewrite of the House bill, and most notably makes OZ policy permanent.
  • June 28, 2025: A new version of the bill is unveiled, granting a rolling 5-year deferral to all new OZ investors after 12/31/2026.
  • July 1, 2025: Following a 15-hour bill reading, 10+ hours of debate, and an overnight marathon vote-a-rama, the Senate adopts a last-minute perfecting amendment and passes H.R. 1, sending the One Big Beautiful Bill back to the House.

Jimmy notes that Republican leadership wants to avoid a formal conference committee or a “ping-pong” of amendments in order to meet the July 4 target.

Deep Dive: Rolling Five-Year Deferral & Basis Step-Up

Jimmy walks the audience through the amended §1400Z-2 language that was introduced by the Senate amendment on June 28. Gain recognition now occurs on the earlier of an investor’s exit or five years after investment. Because that five-year clock resets for each post-2026 investment, the statute no longer relies on rigid end-dates (e.g., 2033, 2043). At the five-year mark, the basis of the QOF interest increases by 10 percent (or 30 percent for QROF stakes).

Qualified Rural Opportunity Funds Explained

The bill creates Qualified Rural Opportunity Funds (QROFs), designed to channel more capital to rural Opportunity Zones. Two advantages stand out:

  1. 30 percent basis step-up after five years instead of 10 percent.
  2. 50 percent substantial-improvement test for existing buildings, making renovation deals financially feasible in sparsely populated areas.

During the live chat, Jimmy concedes that mapping rural boundaries “will be tricky” and expects Treasury to issue guidance on cross-walking the statutory language to census data.

Map Implications: Fewer, Deeper-Need Zones

Using 2023 American Community Survey data, Jimmy had previously calculated in May that the stricter 70 percent AMI rule would shrink the nationwide OZ count by roughly 22 percent—from what would have been 9,000+ zones to about 7,000. Every state except those with very small tract counts would see declines; some, like Minnesota (-42 percent) and Iowa (-37 percent), would face particularly sharp cuts.

Puerto Rico would drop from roughly 700 zones to about 175 once its special rule disappears. Jimmy underscores that today’s best-performing OZ tracts—those already experiencing redevelopment—are unlikely to re-qualify under OZ 2.0, making 2026 the “last chance” to enter well-tested OZ communities.

House Path Forward & Political Dynamics

At air-time, the Senate amendment sat in the House Rules Committee. Jimmy predicts a floor vote “within the next few days,” arguing that leadership prefers speed over perfection. President Trump publicly claimed the House will be “easier than the Senate.” Nonetheless, if deficit-hawks insist on tweaks, the bill could slip past July 4 and force another Senate vote. Jimmy calls that scenario unlikely but “not impossible.”

Live Audience Q&A Highlights

  • Richard: “How does the 2026 dead zone affect current investments?”
    • Jimmy: Investors may still choose OZ 1.0 for three reasons—earlier start on the ten-year clock, certainty about the existing map, and access to higher income tracts that will disappear under stricter rules.
  • Connie: “Could the House fix the 18-month gap?”
    • Jimmy: Possible, but party leaders wrote the Senate language precisely because they believe the House can pass it.
  • Durham-area viewer: Requests rural-definition clarity.
    • Jimmy quotes the statute’s 50,000-population cut-off and notes mapping questions remain open.
  • Andrew: “If I realize a gain in 2026, should I wait for OZ 2.0?”
    • Jimmy cautions that the 2027 map is uncertain until late 2026 and urges consideration of risk tolerance.
  • Pete: Suggests OZ 2.0 tracts may be riskier.
    • Jimmy agrees: the “cream of the crop will be less creamy,” though upside could be greater in truly distressed areas.
  • Richard (installment-sale strategy): Wonders about splitting gain across both programs.
    • Jimmy cites IRS FAQ language allowing separate 180-day periods for each payment and calls the approach to essentially dollar cost average across two different programs “an interesting diversification idea.”
  • Sherry: Asks whether new zones will be added.
    • Jimmy explains the July 1, 2026 start of the re-designation process and expects the map to be finalized months later, prior to activation on January 1, 2027.
  • Patrick Sughroue: Doubts the House will spend deficit headroom fixing the dead zone.
    • Jimmy notes that House fiscal hawks could indeed resist extra cost.

Three Reasons 2026 Investments May Still Make Sense

Throughout the Q&A Jimmy distills a concise list:

  1. Earlier start on an investor’s 10-year holding period. One additional year on the clock, and one additional year of compounding returns could prove beneficial.
  2. Map certainty. The 2018 map is known; the 2027 map is not, and will not be until close to year-end 2026.
  3. Mature zones. Many 1.0 tracts have ongoing projects and improved infrastructure, lowering execution risk compared with brand-new (and in many cases lower-income) 2.0 areas.

He adds a real-world example: Capital Square’s developments in Richmond’s Scott’s Addition neighborhood may no longer qualify under 2.0 because the area has prospered so much since 2018.

Closing Thoughts & Next Steps

Jimmy hails Senate passage as “a huge win for developers, investors, and communities,” even if the package is not perfect. He promises forthcoming episodes on the new reporting rules, state-by-state map changes, and any House action.

With the legislation now “one step closer to reality,” he signs off saying he’ll return soon with fresh updates as Congress races toward the July 4 finish line.