Opportunity Zones for Ohio Developers
By Christopher M. White • November 9, 2026
Illustration of a fictional redevelopment setting; not a designated project.
Opportunity Zone status can help a sound development attract patient equity. It cannot establish tenant demand, cure a title problem, secure utilities, or make an uneconomic purchase price reasonable. Developers should underwrite the property first and then determine whether the tax structure improves the result for the investors who will actually provide the capital.
What Changes In 2027
On November 5, 2026, Treasury announced 6,576 designated census tracts nationwide for the next Opportunity Zone cycle, effective January 1, 2027. The new designations last ten years. The 2025 federal legislation made the designation process recurring and added stronger rural incentives. [1] Ohio’s announcement identifies 260 tracts, including 28 in Franklin County and two in Tuscarawas County. These counts identify places to investigate; they are not evidence that a particular parcel qualifies or that every tract offers comparable demand. [2]
An Opportunity Zone is a designated census tract. A Qualified Opportunity Fund, or QOF, is the investment vehicle through which eligible investors obtain federal benefits. Buying a building inside the boundary without the required fund, investment, and compliance structure does not produce those benefits. [3–4]
Understand The Two Different Gains
The program distinguishes the investor’s original eligible gain from later appreciation in the QOF investment. For qualifying amounts invested after December 31, 2026, the original gain generally becomes taxable at the earlier of disposition or five years after investment. At five years, the basis increase is generally 10% of deferred gain, or 30% for an investment in a qualifying rural opportunity fund. The rural benefit requires the fund to qualify; a rural mailing address is insufficient. [3]
A separate election for a qualifying investment held at least ten years can eliminate covered appreciation through a basis adjustment. For the new regime, the valuation rule stops at the thirtieth anniversary for investments held beyond that date. Ordinary operating income does not become tax-free merely because a property is in a zone. [3–4]
The practical implication is a long holding period and an intermediate tax-liquidity need. Before marketing the project, ask whether investors can fund the tax due at year five without forcing a sale or refinancing on unfavorable terms. A ten-year investment thesis should be reflected in the operating agreement, exit rights, lender terms, and reserve policy.
The Year End Transition Requires Its Own Review
IRS Notice 2026-40 confirms that remaining deferred gain from a qualifying investment held through December 31, 2026 must be included under the legacy rules. That deemed inclusion cannot simply be rolled into a new QOF to obtain another deferral. The original investment can remain potentially eligible for the separate ten-year benefit. [5]
By contrast, newly realized eligible gain from late 2026 may qualify for the new regime when timely invested in a QOF on or after January 1, 2027. The generally applicable 180-day window and special timing rules still matter. Obtain a written timeline identifying the taxpayer, gain event, election, and investment deadline before delaying a contribution. [4–5]
Choose Projects That Fit The Investment
As a business judgment, consider development or substantial rehabilitation that has a credible long-term operating case: rental housing supported by local demand, adaptive reuse with a feasible construction budget, or commercial space with a defensible leasing plan. These are project-screening examples, not a statement that any particular use, property, or fund qualifies.
An entitled but overpriced site may be a worse investment than an undesignated alternative. Compare acquisition cost, rents, absorption, vacancy, taxes, insurance, utilities, environmental work, financing, and exit assumptions without the tax incentive. Then add investor-specific benefits and the extra legal, accounting, reporting, and fund-administration costs. Do not convert a projected investor tax saving into a larger land offer without testing who actually captures that value.
Rehabilitation And Rural Opportunities
Qualifying property generally must satisfy original-use or substantial-improvement requirements. For property in an entirely rural qualified zone, the substantial-improvement threshold was reduced to additions exceeding 50% of the applicable adjusted basis during the 30-month period. IRS Notice 2025-50 explains the rural rule and its July 4, 2025 effective date. [6]
This can make rehabilitation worth examining where the normal improvement threshold would require unnecessary spending. It does not excuse a weak scope of work. Have the tax adviser identify the relevant building basis and treatment of land, document rural status, and reconcile the tax improvement schedule with permits, financing, procurement, and construction contingencies. A project described informally as “rural” should not receive the enhanced benefit in a financial model until qualification is established.
Compliance Is A Continuing Project Cost
A QOF generally must satisfy a 90% qualifying-asset test, measured on specified dates. A subsidiary qualified zone business has separate requirements. The 31-month working-capital safe harbor can help qualifying businesses deploy capital, but requires a written plan, schedule, and compliance with its conditions; it is not blanket permission for a fund to hold idle cash. The federal regulations also distinguish active business activity from merely holding property. [3, 7–8]
Assign a person to maintain the compliance calendar before accepting investor funds. The development team should report changes in acquisition timing, cash deployment, budget, leases, ownership, or exit plans to that person. Annual tax preparation cannot repair every mistake after the fact.
Existing land presents a special trap. Do not assume that contributing an already owned parcel or selling it to a controlled entity creates eligible property. Acquisition dates, related-party rules, and the form of consideration require review before the parties sign a binding deal. Similarly, new acquisitions in a legacy zone after 2026 require attention to redesignation and the specific transition exceptions in Notice 2026-40. [3, 5]
Treat The Ohio Credit Separately
Ohio’s credit is a separate, nonrefundable incentive generally equal to 10% of the qualifying investment deployed into eligible Ohio projects. Current law includes a $2 million applicant limit per fiscal biennium, a $5 million project limit, and $50 million in authorization for each of fiscal years 2026 and 2027. New issuance after fiscal 2027 requires further legislative authorization. Federal eligibility does not by itself establish state eligibility, and the state has its own fund, use, application, and transition requirements. [9]
Underwrite this credit as conditional until the team verifies the application period, available allocation, taxpayer eligibility or transfer route, and evidence of deployment and improvements. Ohio’s published program guidelines require supporting certifications from the fund and property owner. A promise to invest is not the same as documentation that the qualifying investment reached and improved the property. [10] Do not assume the federal program’s permanent renewal permanently funds Ohio’s credit.
A Practical Sequence Before Committing Capital
• Confirm the tract. Match the actual parcel and applicable census vintage to the official designation list and map. Retain the tract identifier, boundary evidence, effective date, and rural determination. Check every parcel in a multi-parcel site. [11]
• Secure a written tax-structure review. Identify the investors with eligible gains, the applicable contribution deadlines, proposed QOF and operating entities, acquisition sequence, related parties, and intended holding period. Separate nonqualifying capital and loans from qualifying equity.
• Make site control conditional where commercially feasible. Negotiate time to verify title, environmental conditions, zoning, access, utility capacity, financing, and tax structure. Avoid closing personally on the assumption that a later transfer will qualify.
• Model three cases. Compare an ordinary investment with no OZ benefits, a compliant OZ investment, and a downside case with delay or lost incentives. Show cash distributions separately from tax benefits. Test the investor’s tax liquidity and an exit earlier than ten years.
• Agree on operating discipline. Allocate responsibility for reporting, asset tests, cash deployment, change approvals, and investor communications. Require tax review before refinancing, distributions, redemptions, or asset sales. Discuss securities-law obligations before soliciting outside investors.
• Verify state and local incentives independently. Examine Ohio credits and any available local abatements or redevelopment assistance, including compatibility, deadlines, fees, recapture, and performance conditions. Do not count an unawarded incentive as committed financing.
The Developer Decision
Proceed when the property works without an exaggerated tax assumption, the investors can tolerate the holding period, and a documented structure survives legal and financial review. Rework the deal when the benefit depends on uncertain designation, a rushed closing, an unsupported rural classification, or an exit inconsistent with the promised holding period. The strongest use of Opportunity Zone status is to improve the capital plan for a viable project—not to substitute for one.
This article states general information as of November 9, 2026. It does not determine eligibility for any parcel, investor, fund, or transaction. Obtain project-specific tax and legal advice, and confirm intervening guidance before committing funds or circulating an offering.
Christopher M. White
Executive Partner | EQUES® Law Group
cmw@eques.law | 234.360.0671
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