Pub. L. 119–21, title VII, § 70421(c)(1)–(3), (5)(A), July 4, 2025, 139 Stat. 225–227, provided that, applicable to amounts invested in qualified opportunity funds after Dec. 31, 2026, this section is amended:

(1) by amending subsection (a)(2) to read as follows:

“(2) Election

“No election may be made under paragraph (1) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect.”;

(2) by amending subsection (b) to read as follows:

“(b) Deferral of gain invested in opportunity zone property

“(1) Year of inclusion

“Gain to which subsection (a)(1)(B) applies shall be included in gross income in the taxable year which includes the earlier of—

“(A) the date on which such investment is sold or exchanged, or

“(B) the date which is 5 years after the date the investment in the qualified opportunity fund was made.

“(2) Amount includible

“(A) In general

“The amount of gain included in gross income under subsection (a)(1)(B) shall be the excess of—

“(i) the lesser of the amount of gain excluded under subsection (a)(1)(A) or the fair market value of the investment as determined as of the date described in paragraph (1), over

“(ii) the taxpayer’s basis in the investment.

“(B) Determination of basis

“(i) In general

“Except as otherwise provided in this subparagraph or subsection (c), the taxpayer’s basis in the investment shall be zero.

“(ii) Increase for gain recognized under subsection (a)(1)(B)

“The basis in the investment shall be increased by the amount of gain recognized by reason of subsection (a)(1)(B) with respect to such investment.

“(iii) Investments held for 5 years

“(I) In general

“In the case of any investment held for at least 5 years, the basis of such investment shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund) of the amount of gain deferred by reason of subsection (a)(1)(A).

“(II) Application of increase

“For purposes of this subsection, any increase in basis under this clause shall be treated as occurring before the date described in paragraph (1)(B).

“(C) Qualified rural opportunity fund

“For purposes of subparagraph (B)(iii)—

“(i) Qualified rural opportunity fund

“The term ‘qualified rural opportunity fund’ means a qualified opportunity fund that holds at least 90 percent of its assets in qualified opportunity zone property which—

“(I) is qualified opportunity zone business property substantially all of the use of which, during substantially all of the fund’s holding period for such property, was in a qualified opportunity zone comprised entirely of a rural area, or

“(II) is qualified opportunity zone stock, or a qualified opportunity zone partnership interest, in a qualified opportunity zone business in which substantially all of the tangible property owned or leased is qualified opportunity zone business property described in subsection (d)(3)(A)(i) and substantially all the use of which is in a qualified opportunity zone comprised entirely of a rural area.

 For purposes of the preceding sentence, property held in the fund shall be measured under rules similar to the rules of subsection (d)(1).

“(ii) Rural area

“The term ‘rural area’ means any area other than—

“(I) a city or town that has a population of greater than 50,000 inhabitants, and

“(II) any urbanized area contiguous and adjacent to a city or town described in subclause (I).”; and

(3) in subsection (c), by striking “makes an election under this clause” and all that follows and inserting “makes an election under this subsection, the basis of such investment shall be equal to—

“(A) in the case of an investment sold before the date that is 30 years after the date of the investment, the fair market value of such investment on the date such investment is sold or exchanged, or

“(B) in any other case, the fair market value of such investment on the date that is 30 years after the date of the investment.”

See 2025 Amendment notes below.

Pub. L. 119–21, title VII, § 70421(c)(4)(A), (B), (5)(B), July 4, 2025, 139 Stat. 226, 227, provided that, applicable to property acquired after Dec. 31, 2026, subsection (d)(2) of this section is amended:

(1) in subparagraphs (B)(i)(I) and (C)(i), by striking “December 31, 2017,” and inserting “the applicable date”;

(2) in subparagraph (D)(i)(I), by striking “December 31, 2017” and inserting “the applicable start date (as defined in section 1400Z–1(e)(2)) with respect to the qualified opportunity zone described in subclause (III)”; and

(3) by adding at the end the following new subparagraph:

“(E) Applicable date

“For purposes of this subparagraph, the term ‘applicable date’ means, with respect to any corporation or partnership which is a qualified opportunity zone business, the earliest date described in subparagraph (D)(i)(I) with respect to the qualified opportunity zone business property held by such qualified opportunity zone business.”

See 2025 Amendment notes below.

2025—Subsec. (a)(2). Pub. L. 119–21, § 70421(c)(1), amended par. (2) generally. Prior to amendment, text read as follows: “No election may be made under paragraph (1)—

“(A) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect, or

“(B) with respect to any sale or exchange after December 31, 2026.”

Subsec. (b). Pub. L. 119–21, § 70421(c)(2), amended subsec. (b) generally. Prior to amendment, subsec. (b) related to deferral of gain invested in opportunity zone property.

Subsec. (c). Pub. L. 119–21, § 70421(c)(3), substituted “makes an election under this subsection, the basis of such investment shall be equal to—” and pars. (A) and (B) for “makes an election under this clause, the basis of such property shall be equal to the fair market value of such investment on the date that the investment is sold or exchanged.”

Subsec. (d)(2)(B)(i)(I), (C)(i). Pub. L. 119–21, § 70421(c)(4)(B)(i), substituted “the applicable date” for “December 31, 2017,”.

Subsec. (d)(2)(D)(i)(I). Pub. L. 119–21, § 70421(c)(4)(A), substituted “the applicable start date (as defined in section 1400Z–1(e)(2)) with respect to the qualified opportunity zone described in subclause (III)” for “December 31, 2017”.

Subsec. (d)(2)(D)(ii). Pub. L. 119–21, § 70421(c)(4)(C), inserted “(50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area (as defined in subsection (b)(2)(C)(ii))” after “the adjusted basis of such property”.

Subsec. (d)(2)(E). Pub. L. 119–21, § 70421(c)(4)(B)(ii), added subpar. (E).

Pub. L. 119–21, title VII, § 70421(c)(5), July 4, 2025, 139 Stat. 227, provided that:

Section effective on Dec. 22, 2017, see section 13823(d) of Pub. L. 115–97, set out as an Effective Date of 2017 Amendment note under section 1016 of this title.