Section
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Opportunity Zones 2.0
Opportunity Zones 2.0 - An Update to the Opportunity Zones Program
Opportunity Zones 2.0 (OZ 2.0) is a permanent extension of the 2017 Opportunity Zones program administered by the US Department of the Treasury and monitored by the US Department of Housing and Urban Development. To qualify as OZ 2.0, census tracts must meet certain median family income and/or poverty rate threshold criteria. A comparison between the original OZ 1.0 and OZ 2.0 criteria can be found here: https://www.hud.gov/opportunity-zones/updates
Maps of eligible OZ 2.0 census tracts:
Listing of eligible Indiana census tracts (Excel):
Of the 501 eligible census tracts in Indiana, the Governor can designate 25% (125) to have OZ 2.0 status. This designation will last for 10 years. If a census tract's boundaries change with the 2030 census, the new boundaries will be disregarded and the 2020 census boundaries will continue to apply until 2037.
Purpose of OZ 2.0
To encourage development, redevelopment, business growth, and mixed-use development in low-income communities. These long-term capital investments ensure sustainable, thriving communities for a stronger overall economy.
Benefits of OZ 2.0
Investments made in Census Tracts designated as OZ 2.0 receive special tax deferment on capital gains to spur real estate and business investment.
From HUD:
A rolling five-year deferral tied to investment date; basis step-up of 10% at five years (or 30% if using a QROF that invests in a rural area OZ); and exclusion of new gains if held 10 years or longer. If held beyond 30 years, full stepped-up basis at the 30th anniversary.
Preparation for Submission
Novogradac has created a guide to help governments and organizations prepare to nominate census tracts: https://www.novoco.com/periodicals/articles/oz-20-nominations-start-in-2026-a-guide-for-what-governors-and-mayors-should-do-now
Housing production and affordability are priorities for the state of Indiana. An OZ 2.0 submission should include evidence of a plan for affordable housing production for maximum consideration.
Rural Census Tracts in OZ 2.0
OZ 2.0 defines non-rural as cities, towns, or urbanized areas contiguous to such towns, that contain 50,000 or more inhabitants. Rural designation applies to all other areas. These census tracts have a lower requirement for development improvement thresholds (50% versus 100%) and a higher step-up in cost basis after five years (30% versus 10%). These changes help make rural development more attractive than OZ 1.0.
Timeline for Indiana OZ 2.0 Designation
- April 1 - May 14 - IHCDA monitors release of Treasury information and creates a nomination form for OZ 2.0
- May 15 - June 30 - Submission portal open for nominations by City, County, or Local Economic Development Organizations
- July 1 - July 31- Governor creates preliminary selection of OZ 2.0 census tracts
- August 1 - August 15 - Public comment period
- August 16 - August 30 - Governor makes final selection of census tracts and submits to Treasury
- January 1, 2027 - OZ 2.0 takes effect for 10 years
Submission Process
The submission portal has a tentative launch date of May 15, 2026.
A PDF copy of the submission form will be available. Please review it and gather all necessary information before starting the submission. There is no save option, so the form must be completed in one sitting.
Additional Resources
IRS Rev. Proc. 2026-12 - Issued April 6, 2026
HUD Information Video: https://www.hud.gov/opportunity-zones/how-do-opportunity-zones-work
IRS Informational Video: https://www.youtube.com/watch?v=70M8KVfg6JU&t=4s