Opportunity Zones are designed to spur economic development in economically-distressed communities by providing federal tax benefits to investors with capital gains. Investors can make investments in low-income census tracts [IRC Section 45D(e)] as designated by the U.S. Treasury.  A low-income census tract is defined as having an individual poverty rate of at least 20 percent or a median family income no greater than 80 percent of the area median income.

Investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026.   If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain.  If held for more than 7 years, the 10% becomes 15%. If the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.

Additional information about the federal program can be found here.