Opportunity Zones are designated census tracts located in economically distressed areas in the United States. The program was created to encourage long-term private investment by offering certain tax incentives to investors who reinvest eligible capital gains into qualified projects that support economic development and revitalization in these areas.
The Tax Cuts and Jobs Act of 2017 created the first federal Opportunity Zones program (“Opportunity Zones I”). In July 2025, the passage of the One Big Beautiful Bill Act made the federal Opportunity Zones program permanent (“Opportunity Zones II”). Although the structure and purpose of the Opportunity Zones are largely the same, Opportunity Zones II imposes new designation requirements and many census tracts that currently qualify as Opportunity Zones will no longer be eligible under the new program.
How Opportunity Zones Benefit Businesses
Opportunity Zones allow individuals and businesses to invest their capital gains in a Qualified Opportunity Fund. A Qualified Opportunity Fund (“Fund”) is an investment vehicle that is organized as a corporation or partnership and holds at least 90% of its assets in qualified opportunity zone property. In other words, an investor can put his or her previously realized capital gains into a Fund and the Fund will invest the money to improve property located in a designated Opportunity Zone.
If the money is used to improve or develop property in a designated Opportunity Zone and an investor holds its investment for at least ten years, the investor may be able to fully exclude the gain from their taxes when the property is sold. This creates a significant incentive to invest in distressed areas. Since the passage of the Tax Cuts and Jobs Act, these tax incentives have led to increase in real estate development and improvement projects within distressed communities and will likely do so in the future.
Designation of New Opportunity Zones
The Ohio Governor has the responsibility of nominating eligible census tracts for designation. Once the tracts are nominated, the Secretary of the U.S. Treasury will certify and designate the nominated census tracts as qualified opportunity zones. By law, the Ohio Governor will re-designate the zones every ten years with the updated final map scheduled to go into effect on January 1, 2027.
To be considered for designation, a census tract must first be eligible. For a census tract to be considered eligible, (1) the average family income within the tract must be less than 70% of the average family income in the state or metropolitan area, or (2) one in five residents must live in poverty and the average family income cannot exceed 125% of the average family income in the state or metropolitan area.
Opportunity Zones II: What It Means for Cuyahoga County
After the federal government created Opportunity Zones I in 2017, Ohio worked with the U.S. Treasury to establish 320 Opportunity Zones, 64 of which were located in Cuyahoga County. There will only be 258 Opportunity Zones in Ohio under Opportunity Zones II (i.e., 25% of Ohio’s total qualifying low-income communities). Consequently, because Ohio will have fewer designated Opportunity Zones under Opportunity Zones II, Cuyahoga County will also see a reduction in its designated Opportunity Zones. However, once the zones go into effect, they will remain in place for ten years.
A ten-year timeframe provides certainty to investors and will allow for the distressed areas that are designated as Opportunity Zones to transform over this ten-year period. More abandoned buildings can transform into productive properties such as businesses, affordable housing, and shopping centers. Investors will have certainty knowing there is a long-term tax incentive, and communities will benefit from having the increased investment.
How We Can Help
Real estate development and improvement projects in Opportunity Zones often involve a range of legal, tax, and financing considerations. Projects may also require resolving title issues, securing grants or financing, and negotiating or drafting agreements related to the acquisition, development, and operation of the property. Addressing these legal and transactional matters early can help support a smoother development process and reduce the risk of delays or disputes.
For more information or to seek counsel from our Real Estate & Construction group, please reach out to request a consultation or call us at 216-696-1422. McCarthy Lebit would like to thank law clerk Logan B. Kijewski for his work in assisting with the preparation of this legal blog post for The More Report.
_____
This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.
