Bottom line: Treasury and the IRS just designated 6,576 new Qualified Opportunity Zones, and they take effect January 1, 2027. Opportunity Zones are now permanent. So if you, your investors, or your employees will have capital gains that QSBS won't cover, Opportunity Zones are a real planning tool again.
What happened
On November 5, 2026, Treasury and the IRS announced the new zones for all 50 states, the territories, and D.C. (IR-2026-132). The key facts:
- 6,576 census tracts were nominated, and every one of them was designated. 2,594 of them are rural.
- They take effect January 1, 2027 and last ten years. The 2025 tax act made the program permanent and set up a new round of zones every ten years. This is the first map under that system.
- How we got here: On April 6, Treasury published 25,332 census tracts that were eligible to be nominated, 8,334 of them rural. Governors (and D.C.'s mayor) started submitting nominations on July 1.
- Washington: 99 tracts were designated. 36 are rural and 63 are not. King County has the most with 25, followed by Pierce and Spokane with 9 each and Snohomish with 7.
Treasury's Qualified Opportunity Zones page has the full tract list.
Why a startup lawyer cares
QSBS and Opportunity Zones answer different questions.
QSBS (§1202) is about the stock you own. If you hold qualifying C-corporation stock long enough, you may be able to exclude some or all of the gain when you sell.
Opportunity Zones (§1400Z-2) are about what you do with a gain you already have. Invest it in a Qualified Opportunity Fund (QOF) within 180 days and you defer the tax on it. Hold the fund investment long enough and the fund's own growth can come out tax-free.
So the two can work together. Some common cases:
- Gain above the QSBS cap. Gain that §1202 doesn't exclude is a candidate for an OZ rollover.
- Stock that doesn't qualify. Maybe you didn't hold it long enough, or a redemption tainted it. That gain can go into a QOF too.
- Investors with other gains. Angels and early employees often have gains from public stock, real estate, or crypto. Putting that gain into a QOF is a way to defer it.
- Founders building in a zone. If your company operates in a designated tract, it may be able to qualify as an "opportunity zone business." Then you have a new kind of investor to pitch: QOFs.
What changed under the new law
For amounts invested in a QOF after December 31, 2026:
- Five-year rolling deferral. The deferred gain is taxed when you sell the QOF investment or five years after you made it, whichever comes first. The old fixed recognition date of December 31, 2026 no longer applies to new investments.
- Basis step-up at five years. Hold for five years and you get a 10% basis increase on the deferred gain. For a "qualified rural opportunity fund," it's 30%. The old extra 5% at seven years is gone.
- Plan for the tax bill at year five. You may owe tax on the remaining deferred gain while your money is still invested in the fund. Holding for ten years can exclude qualifying appreciation in the QOF investment; it does not eliminate the original deferred gain.
- The 10-year exclusion stays, with a 30-year limit. Hold the QOF investment at least ten years and you can elect to set your basis at fair market value, so the growth isn't taxed. If you hold longer than 30 years, your basis is fixed at the investment's value on its 30th anniversary.
One rural benefit is already in effect. For property in a Qualified Opportunity Zone comprised entirely of a rural area, additions to basis during the applicable 30-month period need only exceed 50% of the property's adjusted basis at the start of that period, rather than 100%. This change took effect July 4, 2025.
What to do
Founders: If your company is in one of the new zones, look at it now. To be an opportunity zone business you have to meet tests on where your tangible property is and where your income comes from, and there are limits on some kinds of assets. Those are much easier to plan for before you raise than after.
Anyone heading toward an exit: Figure out which part of your gain QSBS covers and which part it doesn't. You generally have 180 days from the sale to invest the gain in a QOF. Have that conversation before closing, not after.
Don't mix up the two regimes. Investing in a QOF does not automatically give you QSBS treatment. Each regime has separate eligibility requirements.
Timing: The new rules apply to amounts invested after December 31, 2026. Gains you invest before then are still under the old program, and that deferred gain gets recognized at the end of 2026. If you have a late-2026 gain, it may be worth waiting until January to invest, as long as you're still inside your 180-day window. Talk to your adviser.
Watch for guidance. The statute has changed, but Treasury still has to write the rules for investments made after 2026, and those details will matter.
This post is general information, not legal or tax advice.
