While the next phase preserves the long-term tax advantages that have driven Qualified Opportunity Zone investment activity, it also introduces expanded reporting requirements and greater compliance expectations.

For CRG, the focus remains on identifying where Qualified Opportunity Zone capital may complement future development and investment strategies. As the revised program evolves, investors will likely place greater emphasis on experienced development partners, disciplined execution, and a strong understanding of the revised compliance and reporting requirements.

What’s changing under the new legislation.

Permanent Program Structure: Qualified Opportunity Zones will become a permanent part of the Internal Revenue Code rather than a sunset program.

10-Year Cycles: Beginning July 1, 2026, governors will select new Qualified Opportunity Zones every 10 years, with updated designations taking effect January 1, 2027.

Stricter Eligibility Standards: The definition of qualifying low-income communities will narrow, reducing the number of eligible census tracts.

Updated Tax Benefits: Investments made after December 31, 2026 will qualify for a rolling five-year capital gains deferral. Investors may also receive a 10% or 15% basis step-up after five or seven years, respectively, while investments held for at least 10 years will continue to benefit from tax-free appreciation upon sale.

Enhanced Rural Incentives: Qualified Rural Opportunity Funds (QROFs) will receive additional benefits, including a 30% basis step-up and a reduced substantial improvement threshold.

Where the next cycle of capital may flow.

As the next phase of the Qualified Opportunity Zone program takes shape, several themes are beginning to emerge that could influence how capital is allocated across development markets over the coming cycle. The updated 2027 designation process is expected to reduce the number of qualifying Opportunity Zones, creating a more selective investment environment. We are closely watching markets with strong long-term population growth, infrastructure investment, and employment drivers where Qualified Opportunity Zone capital could align naturally with broader development demand.

Because Qualified Opportunity Zone structures tend to favor longer-duration development timelines, the program is expected to remain most closely aligned with ground-up development and large-scale redevelopment projects. Enhanced rural incentives may also increase investor interest in sectors such as logistics, advanced manufacturing, data centers, and infrastructure-oriented industrial development.

At the same time, the combination of tighter eligibility standards and enhanced rural incentives could create a more concentrated investment landscape, directing capital toward a smaller group of potentially stronger long-term opportunities. Importantly, the program’s transition to a permanent framework may also broaden institutional participation over time by providing greater certainty for investors, wealth management platforms, and long-term capital allocators seeking to build durable investment strategies around Opportunity Zones.

As investors evaluate the next phase of the program, we expect increased focus on projects where development timelines, patient capital, and long-term operational fundamentals are closely aligned.

Where CRG sees opportunity ahead.

For CRG, the focus remains on identifying opportunities where Qualified Opportunity Zone capital can complement broader investment and development strategies rather than function as a standalone initiative. As the updated program evolves, CRG continues evaluating markets and project types where long-term development demand, institutional capital, and disciplined execution are best aligned.

Given our experience across the power/data center and industrial/logistics sectors, we believe these areas may present meaningful opportunities as the next phase of the Qualified Opportunity Zone program takes shape.