On June 18, 2026, the IRS released Notice 2026-40 (“Notice”) providing long-awaited transitional guidance bridging the original qualified opportunity zone (QOZ) regime under the Tax Cuts and Jobs Act (“TCJA” and such QOZ regime, “QOZ 1.0”) and the new permanent, “rolling” QOZ regime enacted as part of the One Big Beautiful Bill Act (OBBBA and such QOZ regime, “QOZ 2.0”). The Notice previews forthcoming proposed Treasury Regulations which are expected to cover (i) the mechanics of QOZ re-designation under section 1400Z-1; (ii) transition rules for investors with pre-2027 deferred gains; and (iii) transition rules for qualified opportunity funds (QOFs) and qualified opportunity zone businesses (QOZBs) operating in previously-designated QOZs.

Sarah Eshera, Maxwell Holleman, Kelly H. T. Chan and Russell Lawson, Associates, have contributed to this legal update.

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