Treasury and the IRS are requesting additional comments on the implementation of IRC Section 1400Z-2 following the significant Opportunity Zone amendments enacted by the One Big Beautiful Bill Act(OBBBA). Notice 2026-55 requests comments on most aspects of the Opportunity Zone regulations and identifies several areas in which additional guidance may be appropriate, particularly for activities concerning single-family homes, operating businesses and application of the safe harbor for working capital of a Qualified Opportunity Zone Business (QOZB).

Written comments are requested by November 23, 2026.

Background

The Opportunity Zone regime was originally enacted by the Tax Cuts and Jobs Act through IRC Sections 1400Z-1 and 1400Z-2 to encourage investment in designated low-income communities. Qualified Opportunity Funds (QOFs) generally must hold at least 90% of their assets in qualified opportunity zone property, while QOZBs must satisfy various operational and property-use requirements.

The OBBBA substantially revised and expanded the Opportunity Zone program by making it permanent, establishing recurring Opportunity Zone designation cycles and creating new reporting requirements under IRC Sections 6039K and 6039L (see Tax Alert 2025-1418). The OBBBA also directed Treasury to develop annual public reports measuring the economic impact of Opportunity Zone investments and added a new penalty regime for reporting failures.

Since the OBBBA's enactment, Treasury and the IRS have issued several pieces of Opportunity Zone guidance, including guidance on rural Opportunity Zones, designation procedures, transition rules and proposed regulations implementing new reporting requirements and revised certification and decertification procedures (see Tax Alerts 2026-1373 and 2026-2003).

Request for comments

Single-family home construction

A major focus of the Notice is whether Opportunity Zone incentives can be used more effectively to support development and sale of single-family homes. The Notice follows Executive Order 14394, which directed Treasury and the Department of Housing and Urban Development (HUD) to evaluate whether federal programs and incentives can be better aligned with Opportunity Zone incentives to increase affordable home construction.

Comments are requested on approaches that could better coordinate Opportunity Zone incentives with HUD programs and the New Markets Tax Credit under IRC Section 45D. Comments are also requested on whether legal authority exists to permit deferral of some or all income or gain generated by QOFs engaged in developing and selling single-family homes if sale proceeds are reinvested within a reasonable period. The Notice specifically seeks detailed legal analysis regarding potential statutory authority for such rules and how they would interact with existing income-recognition and anti-abuse provisions of the OZ program.

The Notice also asks for comments on whether the legal analysis differs among a QOF's direct sale of housing inventory, its sale of an interest in a QOZB engaged in homebuilding, and its recognition of partnership-allocated income or gain from a QOZB's sale of housing inventory, including the statutory authority for deferral in each case.

Working capital safe harbor

The Notice requests comments on several unresolved issues involving the QOZB working capital safe harbor. Specifically, the Notice asks whether a QOZB should be permitted to modify an existing working-capital-safe-harbor plan, under what circumstances modifications should be allowed and whether modified plans should be required to remain substantially consistent with the original plan. The Notice also seeks comments on how expenditures of working capital assets should be treated for purposes of the QOZB 70% tangible property requirement.

Operating businesses and other technical issues

The Notice requests comments on whether additional guidance is needed to assist operating businesses in utilizing Opportunity Zone incentives, including issues involving inventory and QOZB property. Treasury and the IRS also seek input on the revised 10-year election under IRC Section 1400Z-2(c), the new 30-year limitation rule, inclusion events, debt-financed transactions, disguised sales and investments in Tribal and Alaska Native communities.

Implications

Under the current rules, a home builder that constructs and then sells a home within the 10-year holding period would be subject to immediate tax upon sale even if the proceeds were reinvested into the construction of additional housing. The detailed questions from the IRS concerning single-family home construction suggest that policymakers are evaluating whether existing Opportunity Zone rules can better accommodate development models that include single-family homes as well as the rental real estate projects that have historically dominated Opportunity Zone investment activity.

Many QOFs forgo investing in operating businesses due to the uncertainty as to whether they will continue to qualify as the business grows and evolves. Additional guidance concerning inventory, business operations and reinvestment concepts could expand the range of businesses able to use Opportunity Zone incentives efficiently and reduce uncertainty in areas where taxpayers have encountered practical challenges.

The working-capital-safe-harbor questions may be particularly important for QOZBs and their investors. Existing regulations provide a framework for the treatment of working capital, but questions about modifications to working capital plans, standards for substantial compliance, and the interaction between working capital expenditures and the 70% tangible property test have not been comprehensively addressed. Additional guidance could create more consistent market practices and provide a clearer framework for what should be included in a plan, what constitutes a change in plan, whether a change in plan is acceptable (and if so under what conditions), and how to evaluate whether a QOZB complied with its working-capital-safe-harbor plan. Depending on the approach ultimately adopted, some taxpayers may need to revisit existing procedures and documentation practices.

Taxpayers with Opportunity Zone investments, particularly those involved in home construction, or operating businesses, should consider whether the issues raised in Notice 2026-55 affect their structures and whether submitting comments before the November 23, 2026 deadline would be beneficial.