2026-01-17

Briana Cooper

Current News

The Federal and State Opportunity Zone Programs are the two most utilized programs for commercial real estate developments of significance that get completed in Ohio.

The transition from the original OZ framework to the newly enacted “OZ 2.0” is well underway and requires attention for any real estate professional who may play any role in a commercial real estate project.

Federal OZ 2.0 changes to opportunity zones

Important Milestones
Under the current framework, investments made before December 31, 2026 receive the original Opportunity Zone benefits, including:

  • Deferral of the obligation to pay tax on the invested capital gain until December 31, 2026;
  • The ability to pay zero capital gain tax on any appreciation on  the invested capital gain that is held for 10 years or more; and
  • The ability to avoid depreciation recapture on the invested capital gain that is held for 10 years or more.

    OZ 2.0 takes full effect beginning January 1, 2027. The Federal Opportunity Zone Program then becomes permanent. There will then be new Opportunity Zone designations/locations and enhanced benefits such as a five year deferral of the obligation to pay tax on the invested capital gain, step up in basis of 10-30% depending on location, and no capital gain tax consequences when the investment is held for 10 years or more.

    New designations will be recommended by Governor DeWine to Treasury starting July 1, 2026. Those designations will become effective on January 1, 2027. Developers with projects currently in Opportunity Zones that will no longer be eligible must take certain steps before the end of 2026. Developers with projects that are eligible under Opportunity Zone 2.0 based on census tract data should advocate for OZ designation because Governor DeWine is only permitted to recommend up to 25% of eligible tracts to designated as Opportunity Zones by Treasury.

    Advocacy for 2.0 Designations
    Proactive advocacy is essential for developers with planned projects that are in areas that are eligible to be in Opportunity Zones, in the upcoming designation process. Zone boundaries for OZ 2.0 will be set through a federal designation process driven by state nominations, meaning interested parties should engage now with local economic development offices, municipal leadership, and state agencies to attempt to ensure that their sites are designated.

    Documenting planned investment, job creation, infrastructure needs, and community impact could materially influence whether an area is designated as an Opportunity Zone. Developers who coordinate with local stakeholders and present “ready-to-go” projects or projects that are progressing position both their sites and their communities to obtain OZ designations under OZ 2.0, and those designations last for 10 years.

    We’ve been deeply involved in Ohio OZ law since its start. We helped get Ohio’s OZ Statute passed in 2019. We’ve since drafted all four amendments to Ohio’s OZ Statute. In this most recent Budget Bill, we provided considerable information to the Legislature on the impact and importance of the Program to Ohio development, which facilitated increased funding for the Program. The Department of Development also incorporated our feedback into the current operative Program Guidelines. We are currently working on the next amendment to Ohio’s OZ Statute.

    Stay tuned for more details as those advocacy efforts progress, and let us know if we can help you with this process.