Hawaii Opportunity Zones Update

According to Kiplinger Personal Finance contributor Daniel Goodwin, the investment landscape for tax-advantaged development is about to undergo its most significant transformation since the original Opportunity Zones program launched in 2017. The One Big Beautiful Bill, signed into law on July 4, 2025, transforms the temporary opportunity zones experiment into a permanent fixture of American tax policy.

Census Tract 406.04 is a current Qualified Opportunity Zone located in Lawai, Kauai and includes Kukui’ula

Unprecedented Opportunities and New Challenges

According to Goodwin, the implications for investors, communities and the broader economy are profound, creating both unprecedented opportunities and new challenges that demand careful consideration.

The current programs’s structure and benefits will sunset as scheduled on December 31 2026, and what emerges in 2027 will be a more streamlined version of the original concept with some important changes in the deferral of the initial capital gains.

Investors will still enjoy the permanent elimination of capital gains taxes on their opportunity zone investments held for at least 10 years. What changes is the treatment of the original deferred gains, and the bill establishes a new category of qualified rural opportunity funds.

One of the most consequential aspects of the One Big Beautiful Bill involves the periodic redesignation of opportunity zones themselves, according to Goodwin. Starting July 1, 2026 governors will be required to select new Census tracts every decade, with the first new designations taking effect January 1, 2027.

The redesignation process will operated under stricter criteria than the original program, revising the “low-income community” threshold from 80% to 70% of the statewide median family income, a change that will eliminate about 22% of the currrent zones according to Goodwin.

Strategic Timing Considerations

According to Goodwin, the transition period between the current program and Opportunity Zones 2027 creates a complex strategic landscape for investors. Those who can deploy capital gains before the December 31, 2026 deadline will enjoy the current program’s more generous benefits.

The current program’s sunset creates urgency for investors looking to maximize their tax benefits under the existing rules.

The Trade Off

While the program’s benefits may be somewhat more modest going forward, and a number of current Census tracts will lose their OZ designation, the permanence of the Opportunity Zone program provides the necessary stability for sustained community investment and development.

As always, check with your financial advisor.