Glossary

Qualified Opportunity Zone (QOZ)

Also known as: QOZ

A designated low-income census tract, certified by the Treasury Department based on state nominations, in which investments made through a Qualified Opportunity Fund are eligible for capital gains tax incentives under IRC Section 1400Z-2.

The zones were designated once under the 2017 Tax Cuts and Jobs Act based on 2010 census data and generally remain fixed for the program's duration, though subsequent legislation has periodically addressed redesignation and program extension, so practitioners must confirm current zone maps and program rules rather than relying on the original designations by default. Investing in QOZ property is not itself the tax benefit — the incentive attaches specifically to reinvesting a recognized capital gain, from any source, into a Qualified Opportunity Fund within 180 days of recognition, deferring tax on the original gain and, if the QOF investment is held long enough, eliminating tax on the QOF investment's own post-acquisition appreciation entirely. Because the underlying zones were selected for economic need rather than investment quality, diligence on a specific QOZ deal's real estate fundamentals is at least as important as the tax structure itself — the tax benefit does not rescue a fundamentally weak asset or location.