What Is OZ 2.0?

OZ 2.0 is the informal name for the permanent, redesigned Opportunity Zone program that replaces the original 2017 framework (OZ 1.0) starting January 1, 2027. Where OZ 1.0 designated a single, fixed set of zones in 2018 and tied every investor to the same December 31, 2026 mandatory inclusion date, OZ 2.0 introduces recurring zone designations on a rolling basis and gives each new investment its own deferral and exclusion timeline tied to the date of investment, rather than one shared deadline.

The core mechanics carry over from OZ 1.0 to OZ 2.0: investors can still defer capital gains by reinvesting them into a qualified opportunity fund, and gains on the fund interest itself are still excluded from tax after a 10-year holding period. What changes is the calendar. Zones designated under the original program wind down over 2027 and 2028, with most expiring December 31, 2028, while new zone designations and fund formations proceed under the OZ 2.0 rules from 2027 forward.

For funds and investors, this means OZ 2.0 does not erase the need for a fair market value determination, it extends it. Every fund raised under the new rules will eventually face its own inclusion event and will need a defensible valuation of the LP interest at that time, using the same lesser-of rule and minority discount (DLOC/DLOM) analysis that applies to funds formed under OZ 1.0. A professional QOF valuation grounds that determination in USPAP-compliant methodology regardless of which version of the program a fund was formed under.

For how the 2026 to 2027 transition affects funds and investors still under the original rules, see our answer on what happens to Opportunity Zones after 2026.