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The District of Columbia is preparing for the next generation of the federal Opportunity Zones program.
The One Big Beautiful Bill Act of 2025 (OBBB) made Opportunity Zones a permanent feature of the U.S. Internal Revenue Code, and a new designation cycle (OZ 2.0) will begin on January 1, 2027. As part of that process, the District must nominate 25 census tracts for designation by the U.S. Department of the Treasury before September 28, 2026.
In July 2026, the Office of the Deputy Mayor for Planning and Economic Development (DMPED) released preliminary recommendations identifying the census tracts it believes should receive Opportunity Zone designation beginning in 2027. The recommendations provide an early look at which neighborhoods may be best positioned to continue attracting Opportunity Zone investment capital over the next decade.
Key Changes Under 2.0
Originally established under the Tax Cuts and Jobs Act of 2017, Opportunity Zones are intended to encourage long-term private investment in economically distressed communities through federal tax incentives. In general, the program allows eligible taxpayers to defer and, in certain circumstances, reduce or eliminate tax on capital gains invested through qualified Opportunity Zone funds, subject to applicable federal requirements and holding periods.
According to DMPED, the District's existing Opportunity Zones have helped attract more than $1.2 billion in capital investment, support more than 120 businesses and facilitate the creation of more than 2,800 housing units citywide.
OBBB makes several notable changes to the program. Most significantly, it narrows the pool of eligible census tracts. Under the revised criteria, a census tract generally must have a median family income (MFI) that does not exceed 70 percent of the area's MFI, reduced from the prior 80 percent threshold. Certain tracts may also qualify under alternative income and poverty-rate criteria established by federal law. OBBB also prioritizes investment in rural Opportunity Zones and repeals the contiguous tract designation provision, which previously allowed certain census tracts adjacent to qualifying tracts to receive Opportunity Zone designation even if they did not independently satisfy the eligibility requirements.
DMPED's Preliminary Recommendations
In developing its recommendations, DMPED considered a variety of factors, including existing Opportunity Zone investment activity, economic development opportunities, job creation, business activity, affordable housing production, redevelopment opportunities and pipeline development projects.
Based on its evaluation of eligible census tracts across the District, DMPED identified 25 census tracts for nomination under OZ 2.0. The recommendations generally focus on areas where Opportunity Zone investment could support mixed-income housing, neighborhood-serving retail and commercial uses, business growth, workforce development and major redevelopment initiatives.
The preliminary recommendations include several census tracts that were not part of the District's original 2018 Opportunity Zone designations, including portions of Brightwood, Columbia Heights, Ivy City/Union Market, Marshall Heights, Bellevue, Langdon/Gateway, Greenleaf/Federal Center SW and Skyland. Many existing Opportunity Zones would remain designated under the proposed OZ 2.0 map.
Next Steps
DMPED is currently accepting public comments on its preliminary recommendations through August 7, 2026. The District will then finalize and submit its 25 nominations to the Treasury Department, which is expected to certify the OZ 2.0 map by December 31, 2026. OZ 2.0 will take effect on January 1, 2027.
Property owners, developers, investors and community stakeholders with interests in affected neighborhoods are encouraged to review the proposed designations and consider submitting comments before the August 7 deadline.
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