California Published 620 Opportunity Zone 2.0 Tracts. Here Is What Investors Should Do Next

California's Opportunity Zone 2.0 list is out. The state nominated 620 census tracts. Treasury certified them in fall 2026. The tracts become opportunity zones on January 1, 2027 and stay designated through December 31, 2036. Los Angeles County has 201 of the 620.

This article is for a gain you invest after December 31, 2026. If you already hold a qualified opportunity fund from before 2027, the deferred gain still comes due on December 31, 2026. The inclusion math, the old 10% and 15% basis increases, and the 10-year benefit on that fund are in opportunity zone gains due December 31, 2026.

Where the 620 tracts are

The California Department of Finance posted the tract file. We counted the rows in OZ2_tracts_GO.xlsx. There are 620 tracts, each with its own census GEOID, in 55 counties. The Department of Finance page says the same 620, covering an estimated 2.6 million people in the 55 counties that had at least one eligible tract.

Los Angeles County has 201 tracts.

Those 15 counties are 505 tracts. The other 115 sit in 40 more counties. Merced and Santa Barbara have 7 each. Seventeen counties have one tract.

A county total is not a map. A Los Angeles County address can miss all 201 tracts, and Orange County has only 13. Look the address up on the state file, or the map on the Department of Finance page, before you run numbers. The file lists the tract GEOID, a county code, the tract name, and the county. It does not mark rural tracts.

How California chose them

A state may nominate up to 25% of the tracts that meet the federal test. California had 2,479 eligible tracts. It nominated 620, and Treasury certified that list.

The Department of Finance scored the 2,479 tracts on 2020-2024 American Community Survey 5-year data: poverty, median family income, renter occupancy and rent burden (renter households spending 35% or more of income on gross rent), crowding (more than one person per room), and unemployment. It combined that score with 1,232 local recommendations and 3,754 public comments. The certified list is the 620 tracts.

The Department of Finance says the designations expire in ten years, when the next round, OZ 3.0, takes effect. That is January 1, 2027 through December 31, 2036.

Rules for an investment made after 2026

IRC §§1400Z-1 and 1400Z-2, as amended by Public Law 119-21 §70421, govern money invested after December 31, 2026. IRS Notice 2026-40 (June 18, 2026) is the transition guidance. Rev. Proc. 2026-14 is the nomination procedure. Proposed regulations are published. They are not final. The IRS frequently asked questions page still describes the old deferral ending December 31, 2026, with a 10% exclusion at five years and another 5% at seven years. Do not use that page for a 2027 investment.

You have 180 days to invest an eligible gain in a qualified opportunity fund.

You recognize the deferred gain on the earlier of the sale or exchange of the fund interest, or five years from the investment date. The old outer date was a fixed day, December 31, 2026.

After five years, basis increases by 10% of the deferred gain, or by 30% for a qualified rural opportunity fund. The extra 5% at seven years is gone. That increase is what reduces the deferred gain you recognize. Confirm the net amount on the form instructions for the year of inclusion. The regulations are not final.

After at least 10 years, you can elect to step basis up to fair market value on a sale. Appreciation escapes federal tax, including depreciation recapture. At 30 years or more, the step-up is capped at the value on the 30th anniversary.

A hypothetical, not a client. Invest $400,000 of a March 2027 gain on day 90 and, if you still hold the fund, the deferred gain is recognized in March 2032. A 10% basis increase on that gain is $40,000. The 10-year election is a later, separate step.

Substantial improvement is 100% of basis in a normal zone and 50% of basis for property in a zone that is entirely rural. A rural area is outside a city or town over 50,000 people, and outside an urbanized area adjacent to one. The 30% increase is for a qualified rural opportunity fund, meaning substantially all of the fund's zone property is used, for substantially all of the holding period, in a zone that is entirely rural. The state file does not mark those tracts. Notice 2025-50 listed rural tracts on the original map, not on this one.

A cost segregation study can move parts of a building to shorter recovery lives. The 10-year federal step-up reaches depreciation recapture. It does not change the California tax below.

An old zone is not a place for new 2027 money

Original tracts stay designated through December 31, 2028. Property acquired after December 31, 2026 still has to be in a newly designated 2.0 zone. Notice 2026-40 gives two exceptions.

• A working capital safe harbor plan adopted in writing by December 31, 2026, with at least 10% of the planned working capital received and at least 5% spent by that date.
• Tangible property bought in the ordinary course of the business, such as routine replacement or modernization. Expansion, and a new trade or business, do not fit.

An existing fund can keep treating an expired zone as a zone for its own compliance tests through December 31, 2047, if the property or business qualified before the designation ended. That does not let you place new 2027 capital in the expired tract.

A 2026 gain can be invested in 2027 if the 180-day window is still open. K-1 start dates are covered in the December 31, 2026 article.

California taxes the gain in the year you sell

This is the number that changes the cash plan for a California investor.

California has never conformed to the federal opportunity zone deferral or exclusion under IRC §§1400Z-1 and 1400Z-2, and it has no similar state rule. Senate Bill 711, signed October 1, 2025, did not adopt the 2025 federal tax law. OZ 2.0 creates no California deferral.

California taxes the gain in the year you realize it. If you sell in 2027 and invest the gain in a fund, the federal return can defer it. The California return cannot. Set aside cash for the state tax in the year of the sale.

If California already taxed that gain, do not include the federal-deferred amount a second time on a later California return. The five-year federal inclusion is generally a federal-only figure. The Franchise Tax Board's Schedule D instructions and the FTB conformity page are the references.

A 1031 exchange is a different tool. It swaps real property for real property on its own clocks. An opportunity zone fund takes an eligible gain, not the whole sale price. The federal zone result will not match the California return.

What to do before you send the money

• Pull the census tract from the Department of Finance file. A city or county name is not enough.
• If the tract is only an old zone, a 2027 investment is outside the new benefits unless one of the two Notice 2026-40 exceptions matches the documents.
• For a fund you already hold from before 2027, use the December 31, 2026 article.
• Count 180 days from the gain.
• Reserve California tax for the year of the sale.
• If someone promises a 30% rural increase or a 50% improvement test, ask which tract is rural. The state file will not say.

Frequently asked questions

How many Opportunity Zone 2.0 tracts did California get?

The Department of Finance file lists 620 tracts, and that agency says Treasury certified them. Los Angeles County has 201. The tracts are in 55 counties and run from January 1, 2027 through December 31, 2036.

Can I put a 2027 investment into an old opportunity zone?

Generally no. Original zones last through December 31, 2028, but property acquired after December 31, 2026 has to be in a new 2.0 zone. The exceptions in Notice 2026-40 are a written working capital plan that met the 10% received and 5% spent tests by December 31, 2026, and ordinary-course replacement property that is not an expansion or a new business.

When is deferred gain taxed on a post-2026 investment?

On the earlier of the sale or exchange of the fund interest, or five years from the investment date. You have 180 days from an eligible gain to invest in a qualified opportunity fund.

What basis increases apply after 2026?

After five years, basis increases by 10% of the deferred gain, or 30% for a qualified rural opportunity fund. There is no extra 5% at seven years. After 10 years, basis can step up to fair market value on a sale, including depreciation recapture. At 30 years, the step-up is capped at the value on the 30th anniversary.

Does California conform to opportunity zone deferral?

No. California has never conformed to IRC §§1400Z-1 and 1400Z-2, and SB 711 did not adopt the 2025 federal law. California taxes the gain in the year you realize it. If California already taxed it, do not include the later federal amount again on the California return.

Does the state list show which tracts are rural?

No. The spreadsheet has the tract id, county code, tract name, and county. A rural area is outside a city or town over 50,000 people, and outside an urbanized area next to one. Notice 2025-50's rural list covers the original map, not this new list.

Talk it through with us

Bring the property address, the sale date, the gain, and whether you already hold a pre-2027 fund. We will check the tract against the state list, separate the federal deferral from the California tax, and say whether a 1031 fits better. LaviCPA does not sponsor or sell opportunity funds. Book a complimentary consultation.

LaviCPA is a Los Angeles CPA firm for real estate investors. Shawn Lavi, CPA, is the firm's principal. Elias Lavi, CPA, is its founder and co-owner.