Colorado submitted 91 geographic areas on Monday for designation as new federal Opportunity Zones, the maximum the state was allowed to request under the program's second round. State leaders estimate the new zones could draw more than $4 billion in investment, building on the more than $3.2 billion Colorado already attracted through the first iteration of the program.
According to denvergazette.com, the state's request came after a review process that included more than 100 stakeholder engagement meetings, six statewide webinars, four regional in-person meetings and a statewide survey. Colorado Gov. Jared Polis and the Colorado Office of Economic Development and International Trade led the effort to gather feedback on which census tracts should make the cut, as gjsentinel.com reported earlier this year. Polis has called Opportunity Zones a compelling tax incentive and said federal tax breaks remain the main driver of the investment dollars flowing into the state, according to The Denver Post.
The program itself was established under the 2017 Tax Cuts and Jobs Act and launched in 2018 as a signature economic development initiative of the first Trump administration, conceived by Kevin Hassett and Jared Bernstein, per the Post's reporting. It was originally scheduled to expire in 2028, but Congress has since made it permanent, requiring states to submit a fresh round of zones every ten years. Investors who roll capital gains into a qualified Opportunity Fund can defer and reduce those taxes by 10% to 15% if the money stays in a distressed zone for five to seven years, and after a decade, capital gains earned on the new investment are eliminated entirely — a notable break from the standard 20% tax normally owed on gains from assets held more than a year.
A Shrinking but More Competitive Pool of Zones
Colorado has 1,447 census tracts total, with 362 eligible for Opportunity Zone designation under the current criteria, per the same account. States are limited to designating roughly a quarter of qualifying tracts, and the U.S. Treasury Department tightened the rules for which tracts qualify in this second round, according to the Post. That has pushed Colorado's allotment down from 126 zones in 2018 to just 91 for the 2027 cycle.
Of the 91 proposed zones, 39 are spread across Denver, Adams, Arapahoe and Jefferson counties, with smaller zones located in north and central-west Denver, southwest Adams County and northeast Arapahoe County, the Post reported. Eight of the proposed tracts sit in El Paso County. Per the Denver Gazette's count, 35 of the 91 zones — about 38% — fall outside the Front Range, and 28 are in rural communities, including Lincoln, Mineral and Rio Blanco counties, according to the Post. Roughly 62% of the nominated zones are along the Front Range, which is home to about 5 million of Colorado's estimated 6 million residents.
What the First Round Delivered
Colorado's track record from the program's first iteration made the case for the bigger ask. The state reached more than $3.2 billion in Opportunity Zone investments through the end of 2024, and 94% of its zones received some investment — including 95% of rural-designated zones — according to the Denver Gazette. Nationally, Opportunity Zone funds held $112 billion in investments by the end of 2024, and a Treasury Department report found 77% of the roughly 8,000 designated census tracts nationwide had received some form of investment, per Bisnow.
Colorado's first-round performance drew conflicting national rankings depending on the metric. The Denver Post reported the state ranked eighth among states for total Opportunity Zone investment through 2024, while also placing second among states for its first-round funding rate. Colorado ranked 20th among states by population that same year, according to the Post, which underscores how disproportionately the state's zones attracted capital.
Jeff Kraft, who oversees business funding and incentive programs for Colorado, said Opportunity Zone investments in the state have mostly funded single-family homes and apartments, according to the Post. Most of that investment has landed in state-designated Enterprise Zones, which allow state tax credits to stack on top of the federal tax breaks — a dynamic reflected in the new proposal, where 89 of the 91 nominated zones, or about 98%, overlap with an existing Enterprise Zone, per the Denver Gazette.
Projects on the Ground, From Hotels to Homeless Shelters
Beyond housing, Opportunity Zone dollars in Colorado have funded new businesses, increased warehouse space and improved broadband connectivity in rural parts of the state, the Post reported. In downtown Colorado Springs, the SpringHill Suites & Element by Marriott opened as an early Opportunity Zone project — a 259-room property that was the first new hotel in the distressed downtown in several decades and helped trigger other redevelopment projects nearby, according to the Post. The Gazette's earlier coverage noted the hotel was under construction and expected to open in 2021.
In western Colorado, Opportunity Zone financing has left a visible mark on Montrose County, where $17 million in public dollars corresponded with $113 million in private investment, according to gjsentinel.com. Shelter Distilling expanded to Montrose.
Four Points Funding backed The Eddy, an apartment project along the Colorado River in Grand Junction, and a $3 million investment from the same fund helped transform a former uranium-mining camp near Naturita into the CampV glamping development, which began operating in April 2021, according to northpeakcre.com. On the Front Range, Opportunity Zone funding helped convert Lakewood's White Swan Motel into a shelter that now houses 20 families, according to The Colorado Sun.
What Comes Next
Colorado's new Opportunity Zone designations are scheduled to take effect Jan. 1, 2027, and last for a decade, according to the Economic Innovation Group. On a per-resident basis, the Post reported Colorado is projecting about $667 in Opportunity Zone investment per resident in the next round, up from roughly $534 per resident received during the first round. Treasury and the IRS have issued guidance to state chief executives and U.S. territories on nominating census tracts under the newly permanent program, pointing to Revenue Procedure 2026-14 as the mechanism for that nomination process, according to the Internal Revenue Service.
Final federal sign-off on Colorado's 91 nominated tracts has not been confirmed. Until Treasury issues that approval, the precise map of which neighborhoods will carry the designation for the next ten years remains an open question for the communities counting on the investment.
