US: Treasury, IRS issue guidance on rural opportunity zone investments under the One, Big, Beautiful Bill

The guidance provides clarification on rural Qualified Opportunity Zone investments, which offer tax incentives to encourage economic growth and job creation in underserved areas.

The US Department of the Treasury and the Internal Revenue Service (IRS) have released guidance on Opportunity Zone investments in rural areas as part of the One, Big, Beautiful Bill on 30 September 2025.

In 2018, certain economically distressed census tracts in the US and its territories were designated as Qualified Opportunity Zones by the Treasury Department. Taxpayers who invest in QOZs receive certain tax benefits for their investments as an incentive to improve economic growth and job creation in these underserved communities.

What’s new under the OBBB

Notice 2025-50 provides clarification on two important One, Big, Beautiful Bill provisions: the definition of “rural area” and the application of the substantial improvement threshold for certain improvements to property located in a QOZ that is comprised entirely of a rural area.

• Under the new law, a rural area means any area other than a city or town with a population greater than 50,000, and any urbanised area contiguous and adjacent to a city or town with a population greater than 50,000. This definition applies to States, the District of Columbia and US territories.
• The OBBB modified the substantial improvement threshold for improvements to property located in a QOZ that is comprised entirely of a rural area. As of July 4, 2025, the substantial improvement threshold for required additions to the basis for property located in these QOZs was reduced from 100% to 50%.

These changes are intended to offer enhanced QOZ tax incentives for investing in underserved rural areas and to address the unique challenges of rural development. There are currently 8,764 QOZs in the United States, many of which have experienced a lack of investment for decades.

The notice released on 30 September by the Treasury Department and the IRS identifies 3,309 of those QOZs as comprised entirely of a rural area. A list of all current, designated QOZs is found in Notice 2018-48.