IRS Releases OZ 2.0 Nomination Guidance: 5 Things You Need to Know

Editor’s note (April 8, 2026): This article originally referenced Revenue Procedure 2026-12. The IRS has since renumbered this guidance to Revenue Procedure 2026-14. All references in the article have been updated accordingly. The embedded video was recorded before this change and refers to Revenue Procedure 2026-12 throughout.

The IRS released Revenue Procedure 2026-14 on April 6, 2026, providing the first official procedural guidance on how states, territories, and the District of Columbia will nominate census tracts for designation as Opportunity Zones under OZ 2.0. The new zones take effect January 1, 2027, under the framework established by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. (For a full breakdown of OZ 2.0 mechanics, see our OZ 2.0 crash course.)

For those who have been tracking OZ 2.0 closely, much of what’s in the Rev. Proc. will look familiar — the nomination timeline, the 25% cap, the new LIC definition, the elimination of contiguous tracts. These are statutory provisions, and the Rev. Proc. largely implements them without drama.

But buried within the procedural language are several details that meaningfully shape how the nomination process will actually play out — and one brand new interpretation that will have a meaningful impact on Puerto Rico’s Opportunity Zones.

1. The Nomination Process Is Iterative

This is the most practically significant new guidance in Rev. Proc. 2026-14, and it deserves to be read carefully.

Under Section 5, state governors are permitted to submit and revise their nominations multiple times during the determination period. But there’s an additional nuance that’s easy to miss: submissions made before the end of the 90-day window are treated as received at the conclusion of the period, not when first submitted.

What this means operationally is that no state gains an advantage by moving early. The nomination window — which opens July 1, 2026, and closes September 28, 2026 (or October 28 with a 30-day extension) — functions as a deliberative period, not a race.

The implications for the OZ community are significant. Developers, municipalities, fund sponsors, and economic development officials who want to influence which tracts get nominated have a genuine window to do so. Community advocacy, data-backed arguments, and direct engagement with state executives can make a difference — right up until the deadline. Don’t assume that whatever list a state floats early in the summer is its final answer.

2. The Official Tract Universe and Controlling Dataset Are Now Confirmed

The Rev. Proc. formally adopts the 2020–2024 ACS 5-Year dataset as the controlling data source for determining LIC eligibility — and explicitly states that it was chosen because it provides the most accurate, up-to-date, and consistent data available. That’s not just bureaucratic boilerplate; it locks in the methodology and removes any ambiguity about what data a state or challenger might use to argue for or against a particular tract’s eligibility.

Also confirmed: the 25% cap rounds up when the number of LICs in a state is not evenly divisible by four. For example, a state with 197 LICs may designate up to 50 — not 49. This is consistent with the approach we used in our own national estimates, based on Rev. Proc. 2018-16.

Using that dataset, Treasury and the IRS have identified 25,332 population census tracts that qualify as LICs under the new definition — the first official government count of eligible OZ 2.0 tracts. Of those, 8,334 tracts are comprised entirely of a rural area, a designation that carries particular weight given the enhanced tax benefits available through Qualified Rural Opportunity Funds (QROFs) for investments in rural zones.

The full list of eligible tracts is available as a downloadable spreadsheet via the Appendix to Rev. Proc. 2026-14, hosted on IRS.gov. Treasury has also indicated it will build an information resource and public mapping interface that displays eligible tracts with demographic overlays, including rural status. In the meantime, you can explore eligible tracts using our interactive OZ 2.0 eligibility map.

We analyzed the preliminary eligible tract universe in detail earlier this year. Read our census data analysis here.

3. Off-List Nominations Are Allowed, With a Catch

Section 5.04 of the Rev. Proc. makes clear that the IRS eligibility list is not exhaustive.

If a state governor believes a tract qualifies as a low-income community under the new § 1400Z-1(c)(1) definition but it doesn’t appear on the official IRS list, they may still nominate it — provided the nomination is accompanied by a detailed analysis, including current census-tract-level data, demonstrating the tract satisfies the LIC requirements.

This is a narrow pathway, not a wide-open door. But for specific markets where a particular tract may have been missed due to data timing or methodology, it represents a real advocacy opportunity.

4. Tract Boundaries Are Locked for the Full Designation Period

This is a subtle but important point for anyone doing site-level analysis or legal due diligence. The Rev. Proc. confirms that OZ 2.0 tract boundaries are based on 2020 decennial census map and are fixed for the entire 10-year designation period — from January 1, 2027 through December 31, 2036.

There will be no mid-cycle redraws, no boundary adjustments, and no tract splits. Whatever map is certified in late 2026 is the map for the next decade. For fund sponsors and QOZB operators, this provides meaningful certainty for long-horizon underwriting.

5. Puerto Rico’s OZ 1.0 Tracts Expire December 31, 2027 — One Year Early

This is a brand new interpretation, and it matters for anyone with Opportunity Zone investments in Puerto Rico.

All of the OZ 1.0 zones designated in 2018 across the 50 states and most territories expire December 31, 2028, at the close of the 10-year designation period that began in 2018. But Puerto Rico is different. Under the Bipartisan Budget Act of 2018, all OZ-eligible tracts in Puerto Rico were automatically designated as Opportunity Zones, effective the date of enactment of the Tax Cuts and Jobs Act — December 22, 2017.

Because the 10-year clock started a year earlier for Puerto Rico, it also ends a year earlier: December 31, 2027. Rev. Proc. 2026-14 confirms this explicitly — and it has real consequences. Investors in Puerto Rico QOFs should be aware their zone timeline is running on a different track than the the rest of the United States.

The OBBBA also eliminated Puerto Rico’s automatic designation going forward. Puerto Rico’s governor may now nominate up to 25% of eligible LICs — the same rule that applies to every other state. The era of blanket PR zone coverage is over.

What’s Next

The nomination window opens July 1, 2026. Between now and then, the Treasury Department will finalize its online Nomination Tool and reach out directly to each state governor with instructions. The 90-day window closes September 28, with an optional 30-day extension available through October 28. New zones will be certified by late November or December 2026 and take effect January 1, 2027.

It’s also worth noting the longer arc: under the OBBBA’s framework, the designation process repeats every 10 years. A new nomination window will open in 2036 for zones effective January 1, 2037. OZ 2.0 isn’t a one-time reset — it’s the beginning of a recurring cycle, which has meaningful implications for how fund sponsors and long-hold investors think about asset-level strategy and fund lifecycle planning.

The OZ 2.0 map will look meaningfully different from OZ 1.0 — narrower LIC eligibility, no contiguous tracts, and a completely fresh nomination process. If you’re still weighing whether to deploy capital under OZ 1.0 or wait for OZ 2.0, see our recent panel discussion on exactly that question. Now that the procedural framework is official, attention turns to the states.