In Revenue Procedure 2026-14, the IRS and Treasury set forth the procedure for the chief executive officer (CEO) of any state, US territory or the District of Columbia to nominate population census tracts as Qualified Opportunity Zones (QOZs) under the new requirements enacted under the "One Big Beautiful Bill Act" (OBBBA)(see Tax Alert 2025-1418). QOZs are designated on a rolling, 10-year basis, with the first determination period beginning on July 1, 2026, and the new census tract designations becoming effective on January 1, 2027.

QOZs under the OBBBA

Under IRC Section 1400Z-1, the CEOs of each state (state, US territory, and the District of Columbia) can nominate population census tracts that satisfy the definition of a low-income community (LIC) to be designated as QOZs. IRC Section 1400Z-2 provides tax incentives to invest eligible capital gains in qualified opportunity funds (QOFs) that hold qualifying property in designated Opportunity Zones.¹

A population census tract qualifies as an LIC, which allows it to be designated as a QOZ, if it meets one of two criteria: (1) its median family income is 70% or less of the statewide median family income; or (2) it has a poverty rate of at least 20% and its median family income does not exceed 125% of the statewide median family income (for non-metropolitan areas) or the metropolitan median family income (for metropolitan areas).

Communities that are contiguous to a QOZ but do not meet the LIC criteria are no longer eligible for a QOZ designation.

The number of census tracts in a state that may be designated as QOZs may not exceed 25% of the number of LICs in the state. The 25%-limitation also applies to Puerto Rico for nominations made on or after July 1, 2026 (before this date, the 25%-limitation did not apply to Puerto Rico and all its LICs were designated as QOZs).

The 10-year QOZ designation ends on December 31, 2028, for QOZs nominated and designated under Revenue Procedure 2018-16 (all but Puerto Rico) and on December 31, 2027, for QOZs in Puerto Rico designated under BBA 2018.

The nomination process under Revenue Procedure 2026-14

Under Revenue Procedure 2026-14, CEOs have 90 days to nominate census tracts beginning July 1, 2026. They may request a single 30-day extension, which would give them until October 28, 2026, to nominate census tracts. The Treasury Secretary must then certify and designate the nominated population census tracts within 30 days, which would be November 27, 2026, without the 30-day extension, and December 28, 2026, with the extension. CEOs may also add new nominations and modify previously submitted nominations until the 90-day period ends.

Revenue Procedure 2026-14 also identifies LICs that are eligible for nomination as 2027 QOZs under the 2020—2024 American Community Survey 5-year and the 2020 Decennial Census of Island Areas. According to the revenue procedure, the boundaries in the 2020 censuses are controlling and not subject to change during the 2027 QOZ designation period. Geographic areas of a QOZ listed in Notice 2018-48 and Notice 2019-42 may be nominated as a 2027 QOZ only if the population census tract is an LIC.

Treasury identified 25,332 eligible population census tracts nationwide, including 8,334 tracts comprised entirely of rural areas. The full list appears in the revenue procedure's Appendix and will also be available through a public online information resource. Population census tracts that are not listed in the Appendix or the information resource can still be nominated if the nomination is supported by a detailed analysis, including current census-tract-level data that satisfies the statutory LIC requirements.

According to the revenue procedure, Treasury is developing an online nomination tool to be used by State CEOs.

Implications

Now is the time for developers with projects or potential projects in population census tracts that could possibly meet the definition of a QOZ to contact state officials to discuss the nomination of those tracts. The last round of allocations showed that the value of land and potential projects increased when it was determined that the project was in a QOZ. Similarly, transactions that were on hold were able to move forward once a QOZ determination was confirmed.