Opportunity Zones 2.0

Opportunity Zones are designated low-income census tracts where investors can receive federal tax incentives for making long-term investments. Investments must be made through a Qualified Opportunity Fund (QOF) and support qualifying activities, such as development, redevelopment, business growth, mixed-use development, and more. The intent is to encourage long-term capital investments in low-income communities.

A Qualified Opportunity Fund (QOF) is an investment fund created specifically to invest in Opportunity Zones. QOFs pool capital from investors and deploy it into qualifying projects or businesses located in designated Opportunity Zone census tracts. These investments can include real estate development, business operations, or other activities that put capital to productive use in the zone.

Qualified Opportunity Funds must:

• Generate substantial economic activity within the zone
• Avoid certain prohibited business types (“sin businesses”)
• Invest at least 90 percent of its assets in Opportunity Zone property

Communities located within eligible census tracts may request consideration for Opportunity Zone designation by submitting a clear investment case to the state. While formal nominations are ultimately submitted by the Governor, communities play an important role in identifying opportunities and demonstrating readiness for investment.

Kansas Commerce will review and vet proposals before advancing recommendations for consideration. Proposals must be received by June 1, 2026, in order to be considered during the designation process.

In advance of the community nomination deadline, Kansas Commerce Business Development staff will conduct workshops and information sessions to help communities understand the process, prepare proposals, and identify potential investment opportunities.

Additional guidance, including the Community Opportunity Zone Application and further details about the submission process, will be released in advance of the deadline.

Investors in qualifying Opportunity Zone investments may receive federal capital gains tax benefits, including:

• Delayed taxation on reinvested capital gains for up to five years
• A reduction in capital gains tax liability for investments held between six and ten years (10 percent step-up in basis; up to 30 percent for qualifying rural projects)
• Permanent exemption from federal capital gains tax on investments held for ten years or more

Opportunity Zones designated during the 2017 program cycle will remain in effect through December 31, 2026. Communities and investors interested in continuing or updating their Opportunity Zone efforts should be prepared to:

• Confirm that their census tract appears on the updated list of eligible tracts
• Demonstrate how their existing Opportunity Zone project has been used to support investment or economic activity

Opportunity Zones 2.0 updates both eligibility and designation rules. While Opportunity Zones remain limited to low-income census tracts, the federal poverty and income thresholds used to define eligibility have been updated.

From this eligible pool, governors may nominate no more than 25 percent of qualifying census tracts for designation, resulting in fewer Opportunity Zones overall. In Kansas, this is expected to reduce the number of designated zones from 74 to approximately 53.

Once designated, Opportunity Zones under this cycle will remain in place for a ten-year period, from 2027 through 2036.

The Opportunity Zones 2.0 timeline includes the following key milestones:

• February 2026 – Updated census data is released, and the U.S. Treasury certifies which census tracts are eligible for Opportunity Zone designation.
• June 1, 2026 – Deadline for community Opportunity Zone nomination proposals to be received by Kansas Commerce.
• July 1, 2026 – The national nomination window opens. Governors have 90 days to submit selected census tracts.
• September 29, 2026 – Deadline for governors to transmit Opportunity Zone nominations to the Secretary of the Treasury. A 30-day extension may be requested.
• October 29, 2026 – Nomination extension window closes.
• December 31, 2026 – Opportunity Zones designated under the original program (OZ 1.0) conclude their designation period.
• January 1, 2027 – Certified Opportunity Zones under the 2.0 designation cycle take effect and remain in place through December 31, 2036.