An Opportunity Zone (OZ) is a federally designated low-income census tract where investors can receive federal tax incentives for investing capital gains through a Qualified Opportunity Fund (QOF) into projects within these geographies.

There are 300 currently active OZ census tracts through December 31, 2028, referred to as OZ 1.0. A new designation cycle begins in 2026, with approximately 217 tracts expected for designation effective January 1, 2027, referred to as OZ 2.0. Designation as an Opportunity Zone under OZ 1.0 does not ensure eligibility or selection under OZ 2.0.

The program is now permanent, with recurring 10-year designation cycles. Eligibility criteria tightened: eligible census tracts must have ≤70% of area median family income or ≥20% poverty rate with ≤125% AMI. In addition, there are enhanced incentives for rural zones: Qualified Rural Opportunity Funds (QROFs) offer a 30% step-up in basis and reduce the “substantial improvement” threshold to 50%.

The Treasury department released the list of eligible census tracts under Revenue Procedure 2026‑14 on April 6, 2026. You can find an interactive map of census tracts eligible to be designated through QOZ 2.0.

Any taxpayer with realized capital gains subject to federal capital gains tax may invest those gains into a QOF to obtain OZ tax benefits.

Governor-designated nominations of eligible census tracts will occur during a 90-day window starting July 1, 2026, with PA accepting stakeholder input (e.g. census tract submissions) through early June 2026. Recommendations will be submitted in early fall 2026 for federal designation effective January 1, 2027.

You can help shape the next round of OZ 2.0 designations in PA by submitting your preferred census tract(s) via PA’s online stakeholder survey, open through early June 2026. Be sure to explain why the area should be designated, highlighting current or planned projects and the potential for investment

Qualified Opportunity Zones is a federal capital gains tax incentive, focused on capital gains reinvestment.

KOZ is a state/local tax abatement program, reducing PA business and local taxes for businesses/residents in specifically designated zones.

Reach out to the Pennsylvania DCED OZ team at oppzones@pa.gov. Continue to check the Qualified Opportunity Zone webpage for updates, webinars, and maps.

Pennsylvania focuses on tracts that demonstrate a balanced combination of:

• Clear economic need: Areas where new business activity, job creation, or revitalization could meaningfully improve local economic conditions and create broader opportunities for residents.
• Realistic investment prospects: Locations that are positioned to attract private capital whether because of emerging projects, market interest, existing assets, or the area’s ability to put new investment to work within the program’s timelines.
• Supportive local conditions: Communities where local zoning, permitting, planning efforts, and leadership help create an environment where development can happen efficiently and with long-term impact.