Title/Name/Summary
Opportunity Zones 2.0 - Designation
History
The federal Opportunity Zones (OZ) program represents significant opportunity for Illinois to channel private investment into economically distressed communities. Unlike traditional community development programs, OZs are uncapped, investor driven, and by-right. Any taxpayer, with a capital gain, can invest in a designated census tract and receive preferential tax treatment without applying for federal approval.
The OZ incentive operates through Qualified Opportunity Funds (QOFs), which pool investor capital and deploy it into eligible investments. Eligible investments include:
New Construction Projects
Substantial Improvements to existing structures
Operating Businesses within designated tracts
Real Estate Development
Opportunity Zones encourage investment by providing a series of capital gains tax incentives for qualifying activities in designated areas:
Deferral of Capital Gains: Investors may defer taxes on capital gains that are reinvested in QOF for up to five years.
Basis step-up: After the five-year deferral, QOF investors receive a 10% reduction (step-up in basis) on their deferred capital gains tax liability.
Permanent Exclusion: Gains earned on investments in QOFs held for at least 10 years are permanently exempt from federal capital gains tax.
The federal government established that governors could designate up to 25% of their state’s low-income census tracts as Opportunity Zones. A census tract is considered low-income if its median family income was at or below 80% of the state or metropolitan statistical area (MSA) median family income. The census tract may also qualify if the poverty rate of the census tract is 20% or higher.
In 2018, Illinois designated 327 census tracts in the original OZ 1.0 program. While investments were made, the overall program utilization in Illinois has underperformed against national averages. The passage of the One Big Beautiful Bill Act (H.R. 1) in July 2025 restructured the federal program, making it permanent and introducing stricter eligibility criteria.
The following changes were proposed in the OZ 2.0 designation.
H.R. 1 established OZs as a permanent component of the federal tax code. Rather than a one-time selection, H.R. 1 establishes recurring designation opportunities. Governors will now nominate new zones every 10 years. The next designations will take affect January 1, 2027.
In addition, to opening designations again, with OZ 2.0 the median family income qualification reduced from 80% to 70% of the median family income for the MSA.
With assistance from the Southland Development Authority, Orland Park staff has identified eligible census tract in the Village. Census Tract 8241.15 has a median family income of $71,635, which is 63.28% of the median family income for the Chicago-Naperville-Elgin MSA.
This census tract is generally located with its western limit LaGrange Road, the eastern limit is approximately, Silver Lake Country Club, the southern limit is 151st Street, and the northern limit is 143rd Street. Most importantly, this census tract includes Orland Square Mall. This area of Orland Park is the economic driver for the Village and the overall south suburban region. With the mall alone generating approximately 6 million visitors a year.
The IL-DCEO is accepting nominations for census tracts to be designated as opportunity zones. Below identifies where the Village census tract meets the criteria used to determine the designation.
Stackability & Incentives - overlap with local, state, and/or federal resources and financing tools.
Currently, the Village is in the process of designating a TIF District for the redevelopment of the former Sears space at Orland Square Mall. This will be a public private partnership where the Village and Dick’s Sporting Goods, redevelop and reactive a long vacant retail anchor. Where a portion of the TIF proceeds will be allocated to stormwater enhancements that will allow for future development and redevelopment at and near Orland Square Mall.
Pipeline & Project Readiness - evidence of a local partner with capacity to support, promote, and sustain, investment.
The redevelopment agreement with Dick’s Sporting Goods has already been approved and staff has had a kick-off meeting with the development team to get them ready for entitlement and building permit approval. Adding this type of incentive to the area could encourage new investment to support the project that is already underway. It will increase the likelihood of development in the surrounding commercial area.
Infrastructure Readiness - Utilities sufficient to accommodate proposed development.
Existing utilities are in place and support development in this corridor. The mall in general, is deficient in storm water capacity to support future redevelopment of the original Orland Square mall planned development. The Village in conjunction with Dick’s Sporting Goods, are increasing stormwater capacity to facilitate additional development and redevelopment.
Economic Anchors - Proximity to local assets that strengthen market potential.
Orland Square Mall is the retail anchor of the south suburbs. The Village overall was ranked 10th in total retail sales out of the 23 core mall markets with $2.8 billion in 2024. An increase of $279 million from 2023.
Community Need and Support - Evidence of economic distress including vacancy.
The former Sears anchor space has been vacant since 2018. There are other properties along the ring road that are either vacant land or have very limited redevelopment potential due to the stormwater restrictions. Improvements to stormwater infrastructure can be extremely expensive and pose a barrier to development. While this OZ will not solve this problem directly, they make the sites more attractive for investors and adds a tool to the economic development toolbox for the Village of Orland Park.
Applications for the OZ 2.0 program are due on April 30, 2026. Staff is seeking direction on whether to pursue this application for the eligible census tract in Orland Park. There are approximately 1,000 eligible tracts in the State of Illinois, meaning only about 250 will be selected. The deadline for the State to submit nominations is late September or October 2026. By the end of 2026 the US Treasury will certify the new opportunity zones. The new OZ 2.0 designation will take effect for 10 years starting January 1, 2027.
This item is now before the Village Board for discussion.
Recommended Action/Motion
I move to approve the Village to submit an application for an opportunity zone as presented;
AND
Authorize the Village Manager to execute any required documentation required for the application.