The Treasury Department and the IRS issued new guidance Sept. 30 on qualified opportunity zone investments in rural areas under the One Big Beautiful Bill Act, the tax-and-spending bill signed into law in July.
In 2018, certain economically distressed census tracts in the United States and its territories were designated as qualified opportunity zones, or QOZs, by the Treasury Department. Taxpayers who invest in QOZs receive certain tax benefits for their investments as an incentive to improve economic growth and job creation in these underserved communities.
Notice 2025-50 provides clarification on two important OBBBA provisions: the definition of “rural area” and the application of the substantial improvement threshold for certain improvements to property located in a QOZ that is comprised entirely of a rural area.
- Under the new law, a rural area means any area other than a city or town with a population greater than 50,000, and any urbanized area contiguous and adjacent to a city or town with a population greater than 50,000. This definition applies to states, the District of Columbia, and U.S. territories.
- The OBBBA modified the substantial improvement threshold for improvements to property located in a QOZ that is comprised entirely of a rural area. As of July 4, 2025—the day President Donald Trump signed the OBBBA into law—the substantial improvement threshold for required additions to the basis for property located in these QOZs was reduced from 100% to 50%.
These changes are intended to offer enhanced QOZ tax incentives for investing in underserved rural areas and to address the unique challenges of rural development, the IRS said.
There are currently 8,764 QOZs in the United States, many of which have experienced a lack of investment for decades. Notice 2025-50 identifies 3,309 of those QOZs as comprised entirely of a rural area. A list of all current, designated QOZs is found in Notice 2018-48.
The IRS said Notice 2025-50 applies to all tangible property located in a QOZ that is comprised entirely of a rural area on or after July 4, 2025, that has been, or is in the process of being, substantially improved.
The Treasury Department and the IRS intend to issue future guidance on the forthcoming round of opportunity zones authorized by the OBBBA, including the nomination and designation procedures.
Photo credit: AevanStock/Shutterstock
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