The One Big Beautiful Bill Act (“OBBBA”), recently signed into law, marks the most substantial reform to the Qualified Opportunity Zone (QOZ) program since its creation in 2017. While the statute makes broad changes across all zones, it devotes particular attention to attracting capital to economically distressed rural areas. Notably, some of these rural incentives take effect immediately, while others will begin on January 1, 2027.

Effective upon enactment, the OBBBA lowers the “substantial improvement” requirement for real property located in rural QOZs from 100% to 50% of the property’s adjusted basis. This change makes it significantly easier for investors to rehabilitate existing structures without the need for complete redevelopment, potentially speeding up revitalization projects in smaller communities.

Starting January 1, 2027, the law will introduce additional advantages through the creation of Qualified Rural Opportunity Funds (QROFs). Investments in QROFs will qualify for a 30% basis step-up after a five-year holding period—triple the benefit available for standard QOZ investments. This enhancement, combined with the already-reduced improvement threshold, is designed to make rural OZ projects among the most tax-advantaged real estate opportunities available. These 2027 changes will coincide with the nationwide redesignation of OZ census tracts, applying stricter eligibility criteria and removing the “contiguous tract” exception.

For legal practitioners advising clients on real estate and tax planning, the timing of these changes is critical. Investors can begin taking advantage of the relaxed improvement rules for rural areas immediately, using the current zone map through the end of 2026. By 2027, new rural investments that qualify under the updated eligibility rules could deliver significantly enhanced tax benefits—but will require careful site selection and fund structuring to ensure compliance with the revised framework.