Opportunity
Zones 2.0
Unlocking Private Investment for
Communities
Kenneth Chapa, Assistant City Manager
PRESENTED BY
What Are Opportunity Zones?
Opportunity Zones (OZs) are federally designated, economically distressed census tracts where investors receive capital gains tax incentives in exchange for deploying long-term private capital.
Created by the 2017 Tax Cuts and Jobs Act.
Governors nominate tracts; U.S. Treasury certifies.
Any entity with capital gains: individuals, C/S-corps, REITs, partnerships can invest via a Qualified Opportunity Fund (QOF) or a Qualified Rural Opportunity Fund (QROF)
Understanding Opportunity Zones
An Opportunity Zone is a federally designated
area that offers investors deferrals and
reductions on federal capital gains taxes for
investing in economically distressed
communities.
FEDERAL CAPITAL GAINS TAX
BENEFITS
Investments are made through a QOF or a
QROF, which serves as a vehicle for
pooling resources targeted at revitalizing
designated census tract.
QUALIFIED OPPORTUNITY FUND
Established by the 2017 Tax Cuts and
Jobs Act, the program has been made
permanent and enhanced by the One
Big Beautiful Bill Act (OBBBA) in July
2025.
PERMANENT LEGISLATION
Barstow qualifies for enhanced rural benefits, unlocking a 30% basis step-up for investors, significantly increasing attractiveness for capital investment in the city's
underserved areas.
ENHANCED BENEFITS
The eligibility criteria have been tightened to 70% of area median income, ensuring that funds are directed to the
communities most in need of revitalization.
TIGHTER ELIGIBILITY
The Opportunity Zones program is now permanent,
eliminating expiration dates and ensuring long-term
investment opportunities for communities like Barstow
without the need for regular redesignation.
PROGRAM PERMANENCE
A new rolling 5-year deferral allows investors to reset their deferral period for every new investment made after January 1, 2027, promoting ongoing community
investment.
ROLLING DEFERRAL
Key Reforms of OZ 20
By investing in the QOF, the investor defers paying taxes on the capital gain, allowing funds to be redirected into community development projects.
STEP 3: TAX DEFERRAL
If the investment is held for five years, investors receive a tax reduction; holding for ten years allows for complete tax-free gains on new investments.
STEP 4 & 5: HOLD FOR BENEFITS
An investor begins by selling an asset, such as stock or property, realizing a capital gain from the transaction that can be reinvested.
STEP 1: SELL ASSET
The investor must then reinvest the capital gain into a Qualified Opportunity Fund (QOF) within a 180-day
period to qualify for tax benefits.
STEP 2: INVEST IN QOF/QROF
How Opportunity Zone Investments
Work
Ilustrative Example:
$500,000 Capital Gain Invested in a Barstow QROF (Rural OZ Fund) on Jan. 1, 2027 Year 0
(2027)
Invest $500K
Capital gain invested into
QROF within 180 days of
realization. Tax on gain is
deferred.
Tax deferred: $119,000*
Year 5
(2032)
30% Basis
Step-Up (QROF)
Rural fund investors receive a
30% basis step-up reducing
the deferred gain from $500K
to $350K.
Tax savings: $35,700
Year 5
(2032)
Deferred Tax
Due
Deferred gain (reduced by
step-up) now recognized and
paid. Net tax owed on $350K
gain.
Net tax paid: $83,300
Year 10+
(2037+)
100% Exit
Gain Exclusion
Any appreciation on the QROF
investment is completely
excluded from income upon
exit.
Appreciation tax: $0
* Assumes 23.8% federal capital gains rate. State tax treatment varies. Investors should consult qualified tax counsel California's OZ Timeline
LOCAL
AUTHORITY
DEADLINE
City submits census
tract recommendations
to GOBiz by 11:59 PM on
July 25, 2026.
GOVERNORS
NOMINATION
WINDOW
Governor nominates up to
25% of eligible tracts from
July 1 to September 30,
2026.
US TREASURY
CERTIFICATION
California's list submitted
to the Treasury by late
September or October for
certification.
NEW OZ MAP
EFFECTIVE
January 1, 2027, marks the
start of the new OZ
designations lasting through
December 31, 2036.
Why This Matters for Barstow
Barstow Qualifies as a Rural OZ Area
Barstow meets the federal definition of a 'rural area.' This unlocks the enhanced QROF incentives: 30% basis step-up (vs. 10%) and 50% improvement threshold making
rehabilitation projects far more financially feasible.
Eligible Tracts Likely Include Key Development
Corridors
Barstow's median family income and poverty rate
characteristics suggest multiple census tracts will qualify under the tightened OZ 2.0 threshold (≤70% AMI or ≥20%
poverty). Four tracts have already been identified by the IRS and American Community Survey data as eligible.
Alignment with BIG Project & Industrial
Development Goals
The Barstow International Gateway logistics hub and
related warehouse/industrial corridor investment align
directly with OZ 2.0's targeted investment in distressed communities. QROF capital can fill equity gaps that
traditional financing cannot.
Barstow's Four Eligible Census
Tracts Overview
The IRS Rev. Proc. 2026-14 confirms four
census tracts in Barstow that meet the
criteria for Opportunity Zone
designation based on income and
poverty levels. American Community
Survey 5-year data (2020-2024) are
also used for validation.
PRE-IDENTIFIED TRACTS
All four tracts qualify for enhanced
Rural Opportunity Zone benefits,
making them attractive for private
investment and community
development initiatives.
ENHANCED RURAL BENEFITS
These tracts are strategically located,
spanning Downtown, Central, and Eastern
Barstow. Will help attract needed
investments in commercial services,
manufacturing, healthcare, and attainable
housing. Promotes private investment in
revitalization, redevelopment, infill, and
adaptive reuse of distressed properties.
STRATEGIC LOCATIONS
The Main Street Corridor is situated along Route 66,
serving as the historic downtown core where both
residents and visitors converge for shopping and
community events.
LOCATION OVERVIEW
• Policy LU 2.1: Balanced mix of land uses
• Policy LU 3.1: Route 66 Main Street
• Policy LU 3.2: Downtown design and land use
2048 GENERAL PLAN LAND USE POLICY ALIGNMENT
• Under the OZ 2.0 framework, investment will target mixed-use redevelopment, historic façade rehabilitation, and new retail opportunities, directly contributing to the revitalization of the downtown landscape. • Industrial zoning in the northern part of the tract will attract investments in value-added logistics and advanced manufacturing
OZ 2.0 ALIGNMENT
Main Street
Corridor
(GEOID: 06071009400)
• Mixed-use redevelopment potential along Route 66, small business capitalization, and neighborhood-serving commercial uses. • Entrepreneurial ecosystems that generate financial and professional services employment accessible to low-income residents without four-year degrees. • Rehabilitation of underutilized storefronts supports main street businesses; retail, food services, and neighborhood services.
• Advanced Manufacturing and value-add logistics provide “pathway roles” that don’t require a bachelor’s degree, as well as workforce development partnerships with providers such as Barstow Community College.
CA JOBS FIRST STATE ECONOMIC BLUEPRINT ALIGNMENT
Central Barstow encompasses a vibrant residential and
neighborhood commercial area with potential to serve
as a High Desert Hub for Medical and Healthcare
services.
LOCATION INSIGHTS
Central
Barstow
• Policy LU 2.1: Balanced mix of land uses
• Policy LU 2.4: Medical professionals and services
• Policy LU 4.3: Public amenities and facilities
2048 GENERAL PLAN LAND USE POLICY ALIGNMENT
• OZ investments can facilitate neighborhood commercial revitalization, invest in medical and healthcare facilities, education and workforce training, and support attainable housing developments, enhancing public facilities and
improving community resources for residents of Barstow.
OZ 2.0 ALIGNMENT
• Healthcare, housing, and education are identified as “Anchor Sectors” within the Blueprint.
• Workforce development and ”pathway roles” opportunities for positions that don’t require a bachelor's degree.
CA JOBS FIRST STATE ECONOMIC BLUEPRINT ALIGNMENT
(GEOID: 06071009502)
Strategically positioned at the Interstate 15/Interstate 40 interchange. Serves as a vital area for local and visitororiented commercial activities as well as an opportunity for infill residential development/redevelopment within vacant or distressed parcels.
LOCATION DETAILS
Barstow
Interchange
• Policy LU 2.1: Balanced mix of land uses
• Policy LU 2.4: Medical professionals and services
2048 GENERAL PLAN LAND USE POLICY ALIGNMENT
• Vacant land and existing neighborhoods attract
investments in single-family and multifamily housing,
benefiting essential workers, students, and families.
• Investments in revitalization and adaptive reuse of
distressed commercial and hospitality properties
OZ 2.0 ALIGNMENT
• Attainable housing opportunities for essential workers, low-income families, and students
• Rehabilitation of underutilized storefronts supports main street businesses; retail, food services, and neighborhood services.
.
CA JOBS FIRST STATE ECONOMIC BLUEPRINT ALIGNMENT
(GEOID: 06071009501)
East Barstwo/MCLB is a key area within Barstow, featuring substantial industrial and commercial development
opportunities along the southern stretch, enhancing
economic activity and connectivity.
LOCATION OVERVIEW
East
Barstow/MCLB
(GEOID: 06071012002)
• Policy LU 1.3: Military coordination on land use and operations • Policy LU 2.1: Balanced mix of land uses
2048 GENERAL PLAN LAND USE POLICY ALIGNMENT
• Vacant land and existing neighborhoods attract investments in single-family and multifamily housing, benefiting essential workers, students, and military and civilian families.
• Increased population from workers and new residents creates demand for neighborhood services (grocery, childcare, and food and beverage), which are currently undersupplied in this area OZ 2.0 ALIGNMENT
• Investment opportunities for Attainable housing and neighborhood services benefiting essential workers, military and civilian families, and students. Housing and services such as childcare are identified as “Anchor Sectors” within the Blueprint.
• MCLB provides access to civilian pathway opportunities that don’t require a bachelor's degree.
• MCLB provides a place-based catalyst that can attract investments in housing, childcare, and food services in the surrounding area. Adjacent industrial zoning can attract
CA JOBS FIRST STATE ECONOMIC BLUEPRINT ALIGNMENT
OZ 2.0 is a Federal Tax Benefit
• Investments made by QROFs/QOFs only impact Federal
Capital Gains liability, not state or local tax obligations.
It is recommended that the Barstow City Council Adopt Resolution No.XXXX-2026 requesting that the Governor of the State of California and the Governor’s Office Business and Economic Development (GO-Biz) nominate Census Tracts: 06071009400, 06071009502, 06071009501, and 06071012002 for designation as Qualified Opportunity Zones under the Opportunity Zones 2.0 program
Recommended Actions
QUESTIONS