Inside Treasury's $112 Billion Opportunity Zone Report

JAJimmy Atkinson·July 29, 2026 · 9 min read

Treasury's new working paper puts a hard number on the first seven years of Opportunity Zones: $112 billion of Opportunity Zone investments through the end of 2024, reaching more than 6,000 census tracts. Catherine Lyons of the Economic Innovation Group joins the show to unpack the data, including the finding that rural Opportunity Zones matched urban ones in reach at 77 percent, even as rural deals came in far smaller.

Plus, Catherine explains what separates a 96 percent hit rate from a 23 percent one as governors finalize their OZ 2.0 nominations, why only 3,000 new investors entered the market between 2021 and 2024, and where the EIG Opportunity Zones Coalition is pushing Treasury to change transition guidance issued in IRS Notice 2026-40.

Guest: Catherine Lyons

Discussed on This Episode

Episode Summary

EIG's Role as One of the Original Architects

Catherine Lyons is Senior Director of Policy and Coalitions at the Economic Innovation Group, where she helps lead the policy team and its work with Congress, the administration, and others to implement ideas based on the research EIG conducts. EIG is a research and policy organization dedicated to creating a more dynamic and inclusive U.S. economy.

She traced the origin of the incentive to a 2015 white paper authored by Kevin Hassett, the current director of the National Economic Council at the White House, and Jared Bernstein, who led former President Biden's Council of Economic Advisors. Two people from different sides of the aisle came together to look at the toolkit of community development tools and economic development policies already on the books and decided there were areas for improvement. That work led to the Investing in Opportunity Act, introduced by Senators Tim Scott and Cory Booker along with Representatives Pat Tiberi and Ron Kind, which was rolled into the Tax Cuts and Jobs Act and passed at the end of 2017.

Catherine joined EIG two weeks after the bill passed into law, which she called a very dynamic time. Since then, EIG has worked through its Opportunity Zones Coalition with Treasury on the implementation of OZ 1.0, drafted improvements with those same congressional sponsors, and was very involved in the OZ 2.0 reconciliation push that made the policy permanent and kicked off the next round of designations.

The Treasury Report: $112 Billion and 77 Percent Reach

Jimmy opened on the Treasury report's headline number: $112 billion that Qualified Opportunity Funds have deployed into Qualified Opportunity Zone property through the end of 2024, reaching more than 6,000 of the 8,700 plus census tracts.

Catherine said the timing was very intentional. Treasury wanted governors equipped with the latest available information and data based on electronic filings from the IRS as they embark on setting the zones in the next map, which will be good for the next 10 years through 2036. Treasury has issued working papers like these before from its Office of Tax Analysis, the most recent in 2023 with data through 2022 showing $89 billion invested. The industry had always estimated the market had crossed $100 billion, and Catherine said we can now say that with 100 percent confidence.

She pointed to the reach as especially notable. Initial reports a couple of years into the policy's life put the share of Opportunity Zones seeing investment at about 48 percent. The report through 2022 had it around two-thirds. Now it surpasses the three-quarters mark.

Rural Parity in Reach, But Smaller Deals

Catherine flagged the rural finding as interesting given the changes Congress made to boost the benefit for rural communities. Rural Opportunity Zones saw the same reach of investment, with 77 percent of rural places also receiving OZ investment. Jimmy noted EIG had used the term bombshell in its write-up, and said he would not have expected tract for tract parity.

Catherine cautioned that Congress's impetus to emphasize rural is still possibly a good thing, because the investment was typically a lot smaller than in urban places. The 300-unit multifamily mixed-use residential project is more likely to go into an urban place than a rural one, so smaller scale investments and developments account for the difference in amounts Treasury reported.

Asked whether the new rural incentives will boost investment going forward, Catherine said that is what she is hearing, though a lot of it is anecdotal. States report more interest in rural investments, because the 30 percent step-up in basis is so attractive and is often paired with the lowered substantial improvement threshold, which is critical for rehabs.

Where the Nomination Window Stands

Recording on July 23, Jimmy said only two states had officially submitted nominations, Arizona and Nebraska. Catherine was not aware of others and explained that Treasury made clear in its April notice that it would wait until the end of the nomination period to review submissions. That gives states room to make changes within the 90-day window. Arizona published what it submitted, and Catherine expects many states will publish at least their draft submissions and continue gathering feedback.

EIG's guidance for governors highlights that transparency as a helpful part of the process. Lessons from 1.0 show that states which relied only on quantitative data and then put selections out for feedback got helpful input from on-the-ground community members saying a selection did not make sense, and retooled from there. States can continue making changes right up until September 28. Jimmy added that 30 states have closed their windows for community recommendations, seven had windows open at the time of recording, and a handful are still getting the ball rolling.

What Separates States That Picked Well

Jimmy noted the report effectively scores every state's OZ 1.0 selections by hit rate, topping out at 96 percent, with Illinois at the bottom at 23 percent.

Catherine said states benefit from much more time now. In 2017, Opportunity Zones were nine pages of a massive bill, many states had no idea what this was, and there were no regs yet, so decisions were made quickly without the understanding that comes with a policy that has been on the books for a decade. She gave credit to Illinois for evaluating its 1.0 selections and working with a university in the state to develop a data and mapping tool.

She held up Colorado as a serious OZ-er and an excellent example. Colorado had a vision, chose a decidedly rural map well before the extra rural benefits existed, and paired it with technical assistance, grants, webinars, and rounds of local recommendations. The result was a 96 percent hit rate.

The Cliff That Flattened OZ 1.0 Fundraising

Jimmy walked through the trajectory story: the seven-year 15 percent basis step-up expiring for investments after 2019 and the five-year 10 percent step-up expiring at the end of 2021, after which both new investors and dollars raised and deployed leveled off.

Catherine found the investor count striking, with only 3,000 new unique investors entering the market between 2021 and 2024 alongside many repeat investors. This is precisely why getting rid of the cliffs and smoothing the flow of capital through a rolling deferral was a core EIG recommendation dating back to 2024. She candidly called it a bit more pie in the sky at the time because it is a more costly way of structuring the incentive, and credited Senator Scott's leadership for getting it into the final package. She expects a much more linear, steady increase, and noted Treasury reports will eventually come annually under the new statute.

Real Estate, Operating Businesses, and the Recycling Problem

On the 77 percent of OZ investment classified as real estate, Catherine said the figure could mask a lot. It does not necessarily mean residential, and could include warehousing and manufacturing facilities, all of which house operating businesses. She wished for more granular data below that umbrella. Anecdotally, from the Novogradac Opportunity Fund Survey, the modal use is residential rental properties, and EIG's own research shows OZs caused the creation of more than 416,000 new housing units in designated communities through Q1 of 2025 that would not have been created without the incentive.

She would still love to see more investment into operating businesses, which will require policy changes to unlock at scale. Operating business deals are happening and there are great case studies on EIG's website, but they remain a small percentage of the market. Part of that is because the regulations were more tailored to real estate through the process that ended in 2019, part is that many communities need the real estate first before follow-on investments in businesses and job-creating entities, and part is that the real estate market already knows how to work with incentives like new markets and LIHTC.

The core issue, Catherine said, is that capital cannot currently be recycled while preserving investor benefits for 10 years. Operating businesses may sell or be acquired within five or seven years, so the 10-year holding period is limiting. The ability to recycle interim gains would be extremely beneficial. It remains a big priority, was included in the Opportunity Zones Coalition letter submitted to Treasury earlier this month, and is something Senator Scott cares deeply about.

Notice 2026-40 and the Coalition's Ask

Turning to the transition, Jimmy raised the question he has fielded for months: whether capital raised after 2026 can go into old tracts that do not get re-designated. IRS Notice 2026-40 addressed it, and Section 5 placed restrictions on that new money.

Catherine appreciated that Treasury moved quickly, since formal regulations are a much lengthier process and stakeholders need transition guidance immediately. Treasury has said it anticipates the formal regulations will look very similar to the notice, with a notice of proposed rulemaking perhaps toward the end of this year.

The requirement is a working capital safe harbor plan in place by the end of 2026, with 10 percent of the money raised and 5 percent deployed. Catherine said that criteria on the whole does not give EIG heartburn, and is similar to criteria first outlined in Senator Scott and Booker's Opportunity Zones Transparency Extension and Improvement Act. The biggest concern is the timeframe. OZ 1.0 zones are good through the end of 2028, full stop. She noted Treasury helpfully confirmed the two overlapping maps can exist at the same time, resolving an ambiguous close read of the statute about the 25 percent limitation.

She also pointed to statutory intent. A House version of the reconciliation bill cut the existing zones off at 2026, and the Senate removed that provision. Communities, investors, project sponsors, and fund managers are relying on these zones through 2028. EIG's main recommendation is a simple change moving those requirements to take effect after December 31, 2028 instead of December 31, 2026.

Catherine flagged one other concern. Treasury confirmed that improvements to existing real estate or acquisitions within the normal course of business are fine, but expansion of the property or the line of business is not. That makes sense from a real estate perspective, but she worries the same limitation will disproportionately hurt investments into non-real estate operating businesses, which need room to expand.

Where to Learn More

Catherine pointed listeners to EIG.org and its OZ 2.0 resource hub, which includes the eligibility map, guidance for governors and mayors, coalition letters, this analysis, webinars, and a regularly updated map of states with links to their published OZ 2.0 processes.

She also described the EIG Opportunity Zones Coalition, a cross-sectional group of market stakeholders including investors, financial institutions, fund managers, philanthropic organizations, CDFIs, and community organizations on the ground such as Opportunity Alabama. The coalition remains focused on regulatory efforts to make sure OZ 2.0 is implemented successfully, and will continue engaging with Congress, since a permanent incentive means more runway to further enhance it.