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ARTICLE · 20 JULY 2026

IRS Issues Notice 2026-40, Providing Transition Guidelines To Opportunity Zone Projects

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The IRS has issued Notice 2026-40 to address the transition from the expiring Qualified Opportunity Zone program under the Tax Cuts and Jobs Act to the new framework established by the One Big Beautiful Bill Act of 2025. This guidance provides critical safe harbors and compliance pathways for investors and qualified opportunity zone businesses navigating the shift from QOZ 1.0 to QOZ 2.0, including specific relief for projects that began before 2026 but will continue development beyond the original program'

United StatesTax
James O. Lang
James O. Lang
Lawrence H. Brenman
Lawrence H. Brenman
Sanford Presant
Sanford Presant
Brian Gaudet
Brian Gaudet
Laura Hendee Siman
Laura Hendee Siman
Go-To Guide:
IRS Notice 2026-40 provides transition relief to qualified opportunity zone projects. The Notice:
  • Acknowledges the Dec. 31, 2028, QOZ 1.0 expiration date and, with the QOZ 2.0 zones becoming effective for investment in QOFs on or after Jan. 1, 2027, enables a pathway for investment in QOZ 1.0 projects by QOZ 2.0 investors.
  • Provides that compliance safe harbors for expired QOZ 1.0 zones continue through 2047 (limited purpose).
  • Allows continued and future investment in QOZ 1.0 zones if the conditions in the Notice are complied with by Dec. 31, 2026.

On June 18, 2026, the IRS issued IRS Notice 2026-40 (Notice), providing transition rules for the expiring opportunity zone census tracts certified under the Tax Cuts and Jobs Act of 2017 (QOZ 1.0). The Notice addresses how “QOZ 1.0” projects may continue to operate in a qualifying manner as the current opportunity zone program approaches key transition dates and new opportunity zone census tracts

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