Sector

Opportunity Zones

Financing structured so it does not undermine the tax structure it sits inside.

Gibson Capital Advisors · Borrower-side debt advisory

Opportunity Zones are a tax structure, not a financing product, and the tax structure constrains the financing in ways that are usually priced too late. The constraint falls in a gap: tax counsel does not size the loan, and the lender does not read the fund documents. The result is financings that are perfectly sound as real estate and quietly destructive as tax structures.

Where debt and OZ compliance actually touch

Debt-financed distributions. A cash-out refinance distributing proceeds in excess of a partner's basis can constitute an inclusion event and accelerate the deferred gain the structure exists to defer. Proceeds must be sequenced against basis, not only against value.
The 30-month substantial improvement window sets the construction timeline, which sets the required loan term and the extension options that matter. A construction loan maturing before the improvement test is satisfied creates a problem no amount of real estate performance solves.
The 90% asset test, measured semiannually, constrains how long undeployed proceeds can sit, which is a real argument for a delayed-draw structure over a fully funded one.

The current landscape

The One Big Beautiful Bill Act made the Opportunity Zone program permanent, moving to new designations every ten years with the next designation effective July 1, 2026 and each designation running ten years. Investments made from January 1, 2027 fall under the revised regime with a rolling five-year deferral. Rural opportunity funds carry a 30% basis step-up at five years and a substantial improvement threshold reduced from 100% to 50%, which materially changes the arithmetic on rural ground-up development.

Deferred gains under the original program are recognized on December 31, 2026. Any refinancing or recapitalization of an OZ asset contemplated before year-end should be sequenced with that date in view rather than around it.

Financing or refinancing an Opportunity Zone asset?

Send the structure and the contemplated transaction and we will identify where the financing and the tax structure conflict before it is priced.

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This material is for general educational purposes only and does not constitute legal, tax, or financial advice. Opportunity Zone structuring decisions should be made with qualified tax counsel; our role is to ensure the financing is structured so it does not undermine them. Program rules change and apply differently to specific facts. Gibson Capital Advisors does not provide legal, tax, accounting or securities advice and does not make loans.