Origin: The TCJA added Code Subchapter Z, §§ 1400Z-1 and 1400Z-2, effective December 22, 2017. The OBBBA amended Subchapter Z, effective December 31, 2026. Under Subchapter Z, Taxpayers may elect to defer gain from a sale or exchange of property to an unrelated party by reinvesting that gain within 180 days of the sale or exchange in a "qualified opportunity fund." For tax years prior to 2027, the deferred gain must be included in income upon the earlier of (i) the tax year in which the taxpayer's investment in the qualified opportunity fund is sold or exchanged, and (ii) December 31, 2026. For the 2027 tax year and thereafter, the deferred gain must be included in income upon the earlier of (i) the tax year in which the taxpayer's investment in the qualified opportunity fund is sold or exchanged, and (ii) five years after the date of investment in the qualified opportunity fund was made. In either case, the amount of gain includable is the excess of: the amount of gain excluded or the fair market value of the investment in the qualified opportunity fund, whichever is less, over the taxpayer's basis in the investment. For tax years prior to 2027, if a qualified opportunity fund investment is held for at least five or seven years by the date of deferred gain inclusion, the taxpayer's basis in the investment is increased by 10% or 15%, respectively. For the 2027 tax year and thereafter, if a qualified opportunity fund investment is held for at least five years, the taxpayer's basis in the investment is increased by 10% (or 30% for rural investments). Qualified opportunity fund investments held for at least 10 years can be sold tax-free.
This tax expenditure is affected by OBBBA (One, Big, Beautiful Bill Act) which was signed into law on July 4, 2025. Please refer to Appendix A for more details.
Origin: IRC §§1400Z-1; 1400Z-2; PL 119-21, § 70421
Corporate Excise Tax
Deferrals of Gross Income
2.102
Deferral of Federal Gain Invested in Qualified Opportunity Zones
The TCJA added Code Subchapter Z, <a href="https://www.law.cornell.edu/uscode/text/26/1400Z-1" target="_blank">§§ 1400Z-1</a> and <a href="https://www.law.cornell.edu/uscode/text/26/1400Z-2" target="_blank">1400Z-2</a>, effective December 22, 2017. The OBBBA amended Subchapter Z, effective December 31, 2026. Under Subchapter Z, Taxpayers may elect to defer gain from a sale or exchange of property to an unrelated party by reinvesting that gain within 180 days of the sale or exchange in a "qualified opportunity fund." For tax years prior to 2027, the deferred gain must be included in income upon the earlier of (i) the tax year in which the taxpayer's investment in the qualified opportunity fund is sold or exchanged, and (ii) December 31, 2026. For the 2027 tax year and thereafter, the deferred gain must be included in income upon the earlier of (i) the tax year in which the taxpayer's investment in the qualified opportunity fund is sold or exchanged, and (ii) five years after the date of investment in the qualified opportunity fund was made. In either case, the amount of gain includable is the excess of: the amount of gain excluded or the fair market value of the investment in the qualified opportunity fund, whichever is less, over the taxpayer's basis in the investment. For tax years prior to 2027, if a qualified opportunity fund investment is held for at least five or seven years by the date of deferred gain inclusion, the taxpayer's basis in the investment is increased by 10% or 15%, respectively. For the 2027 tax year and thereafter, if a qualified opportunity fund investment is held for at least five years, the taxpayer's basis in the investment is increased by 10% (or 30% for rural investments). Qualified opportunity fund investments held for at least 10 years can be sold tax-free.<BR><BR>This tax expenditure is affected by OBBBA (One, Big, Beautiful Bill Act) which was signed into law on July 4, 2025. Please refer to Appendix A for more details.
IRC <a href="https://www.law.cornell.edu/uscode/text/26/1400Z-1" target="_blank">§§1400Z-1</a>; <a href="https://www.law.cornell.edu/uscode/text/26/1400Z-2" target="_blank">1400Z-2</a>; PL 119-21, § 70421
9.6
24.2
15.1
4.2
(27.5)
