The Opportunity Zone (OZ) program, originally enacted under the 2017 Tax Cuts and Jobs Act, was designed to stimulate private investment in low-income communities by offering significant tax benefits to investors who reinvest capital gains into Qualified Opportunity Funds (QOFs). Over the years, these incentives have primarily attracted real estate developers, but the updated framework under the One Big Beautiful Bill Act (OBBBA) opens new opportunities for the sports and entertainment industries. Stadium projects, music venues, and entertainment districts—often large-scale catalysts for community redevelopment—stand to benefit significantly under the new rules, provided developers navigate the program’s complex legal and tax requirements.
The OBBBA, enacted in 2025, makes several sweeping changes to the Opportunity Zone program. Most notably, it makes the program permanent, introduces a new cycle for zone redesignation, and expands some of the federal tax benefits. States must now reselect OZ tracts every ten years beginning in 2027, using stricter criteria based on poverty rates and median income levels. This means future designations will likely capture genuinely underserved communities, while some previously eligible tracts may lose status. The permanence of the program gives developers more predictability, while the decennial redesignation adds a new layer of diligence for long-term projects like stadiums or entertainment districts, that may take years to plan and build.
The legislation also refines the program’s tax benefits. For new investments made after December 31, 2026, investors may still defer tax on eligible capital gains for up to five years. After that period, they can receive a 10% basis step-up, effectively reducing their taxable gain. The OBBBA retains the powerful incentive that allows investors to exclude post-investment appreciation on assets held for at least ten years. Importantly, for rural Opportunity Zones, the act introduces a supercharged benefit: a 30% basis step-up after five years and a relaxed “substantial improvement” test—requiring only a 50% increase in basis rather than 100%. This makes rural sports complexes, entertainment venues, and destination resorts especially attractive for investment.
These updates have meaningful implications for sports and entertainment developments, which often require large tracts of land and involve significant public-private partnerships. Opportunity Zone incentives can now play a pivotal role in funding such projects. A sports franchise, or developer with substantial capital gains can reinvest them into a QOF that funds construction of a stadium or surrounding entertainment district, deferring taxes and potentially eliminating capital gains on appreciation. The same logic applies to entertainment companies building film studios, live performance venues, or esports facilities on OZ land. These investments not only stimulate local economies, but also align closely with the policy goals of the OZ program—revitalizing underserved areas and generating employment.
For urban projects, the alignment between sports and entertainment development and community revitalization is particularly strong. Many stadiums and arenas sit within or adjacent to low-income areas in need of infrastructure improvements and commercial activity. OZ investments can help finance the mixed-use neighborhoods that often accompany such projects—hotels, restaurants, retail, and residential developments that create year-round activity and job opportunities. With the program now permanent, long-term planning becomes more viable, allowing developers to design projects with both economic return and social impact in mind.
Rural Opportunity Zones present a different, but equally compelling, opportunity. The OBBBA’s rural enhancements could incentivize the creation of destination sports complexes, training centers, and entertainment resorts outside major metropolitan areas. Developers could, for instance, use OZ capital to build a motorsport track, entertainment resort, or music festival campus in a rural area, capturing both the enhanced 30% basis step-up and the community development narrative that often unlocks local incentives. The relaxed substantial improvement rule for rural projects also makes it easier to repurpose existing land or facilities into new entertainment hubs.
However, while the tax benefits are significant, developers and investors must navigate several key legal and compliance challenges. The QOF must hold at least 90% of its assets in qualified Opportunity Zone property, and the underlying operating business—known as a Qualified Opportunity Zone Business (QOZB)—must have at least 70% of its tangible assets located within the zone. The QOZB must also derive most of its income from within the zone and cannot operate in certain prohibited industries, such as casinos or golf courses. This means developers must carefully structure projects to ensure that stadiums, venues, and related facilities qualify under the statute. Entertainment uses such as theaters, music halls, or film studios generally qualify, but mixed-use districts must be evaluated to ensure that no component jeopardizes compliance.
The “original use” and “substantial improvement” requirements pose another layer of complexity. To qualify, property must either be newly placed in service within the zone or be substantially improved within a 30-month period. For redevelopment of existing stadiums or arenas, this means significant additional investment must be made to meet the improvement threshold—though the OBBBA’s rural relaxation may make that easier in some contexts. Developers must also be mindful of timing: the OZ deferral and exclusion benefits are contingent on how long the investment is held, making long-term planning and stable ownership structures essential.
Beyond tax and compliance considerations, developers must address community and political dynamics. Stadiums and entertainment districts are often lightning rods for public scrutiny, and OZ projects must demonstrate tangible local benefits to maintain goodwill. Aligning OZ investments with broader redevelopment goals—job creation, infrastructure improvement, local hiring, and affordable housing—can enhance community acceptance and potentially unlock complementary incentives, such as tax-increment financing or municipal infrastructure grants.
From a strategic standpoint, the OBBBA makes Opportunity Zone participation more attractive for long-term capital and institutional investors interested in the intersection of real estate, entertainment, and community impact. The permanence of the program eliminates prior uncertainty, while the new rural enhancements broaden its geographic reach. For sports teams, entertainment companies, and investors, the program offers a tool to defer taxes, enhance returns, and contribute to place-based economic growth — all while reshaping the financing landscape for stadiums and entertainment facilities.
Still, the Opportunity Zone structure is not a one-size-fits-all solution. Projects with shorter investment horizons may not fully benefit from the 10-year hold requirement, and investors seeking quick exits may find the compliance burden too heavy. Moreover, the complexity of coordinating federal OZ rules with local zoning, land-use approvals, and financing arrangements demands sophisticated tax and legal planning.
In sum, the OBBBA has transformed Opportunity Zones from a time-limited experiment into a permanent development tool, one that can be especially potent for the sports and entertainment sectors. For developers and investors willing to navigate the program’s technical requirements, the potential rewards — both financial and social — are substantial. By strategically leveraging these incentives, the next generation of sports arenas, music venues, and entertainment districts could not only anchor vibrant communities but also redefine how private capital and public policy intersect to drive inclusive economic growth.
