Texas has received federal approval for 608 census tracts across 106 counties under the Opportunity Zones 2.0 program, establishing new areas eligible for federal tax incentives intended to attract private investment and encourage economic development.
The U.S. Department of the Treasury approved all 608 census tracts nominated by Gov. Greg Abbott on Nov. 5. The designations take effect Jan. 1 and remain in place through Dec. 31, 2036.
The approved areas represent approximately 8.8 percent of Texas’ 6,896 census tracts.
Opportunity Zones provide federal tax incentives to investors who direct eligible capital gains into Qualified Opportunity Funds, which invest in designated economically distressed communities.
The program was established in 2017 and made permanent through federal legislation enacted in 2025. The updated Opportunity Zones 2.0 framework introduces revised eligibility requirements, additional incentives for rural investments and a process for redesignating eligible areas every 10 years.
Under the new framework, governors may nominate up to 25 percent of their states’ eligible census tracts for federal certification.
Texas’ Economic Development and Tourism Office, operating within the governor’s office, coordinated the state’s nomination process.
The office worked with local economic development organizations and county judges to identify eligible census tracts where private investment could support business development, housing construction, job creation and other economic development priorities.
Local officials were asked to prioritize areas that met federal eligibility requirements and demonstrated community support for investment.
The selection process also considered whether projects could realistically attract private capital within 24 to 48 months.
Communities were encouraged to identify potential investments that could support affordable housing, workforce development and other local economic priorities.
State officials also considered geographic representation, opportunities to use enhanced rural investment incentives and areas affected by federally or state-declared disasters within the previous three years.
Texas submitted its nominations to the Treasury Department on Sept. 4.
The updated program narrows the income criteria used to determine which census tracts qualify for designation.
Eligible tracts generally must have a median family income below 70 percent of the applicable state or metropolitan median, or a poverty rate of at least 20 percent combined with a median family income no greater than 125 percent of the applicable benchmark.
The revised program also eliminates a provision that previously allowed certain census tracts adjacent to qualifying low-income areas to receive Opportunity Zone designations.
Under Opportunity Zones 2.0, qualifying investors can receive a five-year capital gains tax deferral and a 10 percent increase in the tax basis of eligible investments after five years.
Additional incentives are available for qualifying rural investments, including a 30 percent basis increase after five years for investments meeting applicable rural Opportunity Fund requirements.
The program also reduces the substantial improvement requirement for qualifying rural properties from 100 percent to 50 percent, potentially lowering the amount of additional investment needed for certain redevelopment projects.
Investors who hold qualifying Opportunity Zone investments for at least 10 years may also receive favorable federal tax treatment on investment appreciation, subject to program requirements.
The new designations will overlap temporarily with Texas’ original Opportunity Zones.
In 2018, Abbott nominated 628 census tracts across 145 counties under the initial program. Those designations remain eligible through Dec. 31, 2028.
The two-year overlap will allow the original and updated programs to operate simultaneously before the initial designations expire.
Census tracts designated under the original program were not automatically approved for Opportunity Zones 2.0.
The federal designations do not provide direct grants to communities or guarantee that development projects will occur. Instead, they establish areas where qualifying private investments may receive federal tax benefits.
Photo by Andrew Patrick Photo from Pexels
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