Low-income community census tracts, defined in Section 45D of the Internal Revenue Code, are the building blocks of Opportunity Zones. Eligible low-income census tracts generally had either poverty rates of at least 20 percent or median family incomes no greater than 80 percent of their surrounding areas, according to the U.S. Census Bureau’s American Community Survey data at the time of designation.
The governor or chief executive of every U.S. state and territory nominated up to 25 percent of their low-income census tracts to be certified by the Secretary of the Treasury as Opportunity Zones. Eligibility was limited to only a portion of each state’s low-income census tracts in order to concentrate capital and increase the likelihood of meaningful economic development taking root in zones. Governors were given the discretion to include moderate-income census tracts adjacent to nominated qualifying low-income ones for up to 5 percent of their nominations in order to create coherent economic zones and account for local priorities.
The designation process resulted in 97.4 percent of OZ tracts qualifying under the low-income community definition, and 2.6 percent qualifying under the law’s “contiguous tracts” provision. Fully 71 percent of Opportunity Zones communities met Treasury’s “severely distressed” standard at the time of designation.
Congress made a special exception for Puerto Rico. The Bipartisan Budget Act of 2018 allowed Puerto Rico to designate 100 percent of its low-income census tracts as Opportunity Zones. In 2019, the IRS issued a notice designating two additional census tracts in Puerto Rico as OZs that qualified based on the 2012-2016 ACS data. As a result, 98 percent of the island’s census tracts are Qualified Opportunity Zones.
More information on the designation process and a statistical overview of designated tracts can be found here.