IRS Notice: Reduced Substantial Improvement Threshold for Rural Opportunity Zone Properties (IRC §1400Z-2)

The IRS published a notice providing guidance to taxpayers applying the substantial improvement provision of Section 1400Z-2(d) of the Internal Revenue Code as amended by Section 70421(c)(4)(C) of the One, Big, Beautiful Bill Act (OBBBA), for certain improvements to property located in a qualified opportunity zone (QOZ). The guidance includes reducing the substantial improvement threshold from 100 percent to 50 percent for tangible property located in qualified opportunity zones that are comprised entirely of rural areas. [IRS Notice 2025-50, (Sept. 30, 2025)]

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