Opportunity Zones Program Permanently Extended – Legislative Update

On July 4, 2025, President Trump signed H.R. 1 into law, permanently extending the Opportunity Zone (OZ) program and introducing several reforms under what is commonly referred to as “OZ 2.0.” The legislation creates a new framework for future OZ investments starting in 2027, while maintaining the current OZ map through the end of 2026.

This update provides a summary of the legislation and its implications, particularly as it relates to Urban Catalyst and the Downtown San Jose census tract where our current Opportunity Zone fund is located.

Legislative Timeline

• 5/22/2025 – House passes H.R. 1 which would renew Opportunity Zones through 2033.
• 6/16/2025 – Senate releases amended H.R. 1, which would renew Opportunity Zones permanently.
• 6/28/2025 – OZ 2.0 language modified further to include rolling 5-year deferrals.
• 7/1/2025 – Senate passes H.R. 1, 51-50 (with VP Vance breaking the tie).
• 7/3/2025 – House passes H.R. 1, 218-214.
• 7/4/2025 – President Trump signs bill into law during Independence Day ceremony.
  
  

Next Milestones to Watch

• 7/1/2026 – States begin determining new OZ tracts for a 90-120 day period.
• 10/29/2026 (approx.) – Unofficial OZ 2.0 map expected.
• 12/28/2026 (approx.) – Official OZ 2.0 map expected.
• 1/1/2027 – New zones become active; first investments under new rules begin.
• 2027 Tax Season – Enhanced fund reporting takes effect.
  

Summary of Legislative Changes

• The Opportunity Zone program has been made a permanent part of the federal tax code.

• New OZ tracts will be selected every 10 years beginning July 1, 2026.

• The next map will go into effect on January 1, 2027.
  
  

• Investments made after December 31, 2026, will be eligible for a five-year deferral of capital gains.

• These investors will also receive a 10% increase in basis after five years.
  
  

• For qualifying rural zones, the law provides a 30% basis increase and lowers the substantial-improvement requirement for existing buildings to 50%.
  
  

• The updated law removes the “contiguous tract” exception and narrows the definition of a low-income community.

• As a result, approximately 22% of existing Opportunity Zones, including Downtown San Jose, are no longer expected to qualify for designation in 2027.
  
  

• The legislation includes expanded annual reporting requirements for Qualified Opportunity Funds, set to begin with the 2027 tax year.

Implications for Urban Catalyst

Impact on Current Fund
Urban Catalyst’s current Opportunity Zone fund operates under the original program rules and will not be impacted by this new legislation. The new provisions do not apply retroactively and do not extend deferral deadlines; the 12/31/26 recognition date remains.

Downtown San Jose Tract Status
The Downtown San Jose census tract, where Urban Catalyst’s current Opportunity Zone fund is located, originally qualified under the now eliminated “contiguous tract” provision. Based on the updated eligibility criteria, which tighten the definition of a “low-income community,” this tract is no longer expected to qualify under the 2027 Opportunity Zone map.

Downtown San Jose demonstrates strong economic fundamentals, which make it a potentially attractive investment location. These characteristics, while beneficial for long-term investment opportunities, now place the tract outside the scope of future OZ eligibility. While new OZ funds cannot be formed in this area going forward, our current fund remains grandfathered under the original legislation and continues to operate under those terms.

Industry Considerations

• The updated law excludes certain policy proposals, such as inclusion of non-gain capital, retroactive deferral extensions, and changes to operating business requirements, due to budgetary constraints.
• The period between January 1 and December 31, 2026, may see reduced investor activity, as the new OZ incentives do not begin until 2027.

State governments will begin selecting eligible census tracts on July 1, 2026. Final maps are expected by year-end 2026.

Final Thoughts

While the legislative changes do not impact Urban Catalyst’s current fund, we believe that the permanent extension of the Opportunity Zone program provides regulatory clarity that may help support long-term community investment across the country.

Contact us to find out more about Urban Catalyst Funds. 

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These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified.

Past performance is no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.

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Real Estate Risk Disclosure:
There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.; Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments; Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities; Potential for foreclosure – All financed real estate investments have potential for foreclosure; Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments. Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions; Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.

OPPORTUNITY ZONE DISCLOSURES

• Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings.

• Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments.

• Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations.

• Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available.

• Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund.

• Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments.

• Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.

• It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.

• The above material cannot be altered, revised, and/or modified without the express written consent of Urban Catalyst.

UCME DISCLOSURES:
This confidential presentation (this “Presentation”) is being furnished upon request and on a confidential basis to a limited number of sophisticated investors on a “one-on-one” basis for the purpose of providing certain information about UC Multifamily Equity I LLC (the “Fund”). This Presentation is for informational and discussion purposes only and is not, and may not be, relied on in any manner as legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to purchase any securities of the Fund. Any such offer or solicitation shall only be made pursuant to the final confidential private placement memorandum (as amended or supplemented from time to time, and including the subscription agreement attached thereto, the “Subscription Package”) and the Fund’s limited liability company agreement, which will be furnished to qualified investors on a confidential basis at their request and should be reviewed in connection with any consideration of an investment in the Fund. No person has been authorized to make any statement concerning the Fund other than as will be set forth in the Subscription Package and any representation or information not contained therein may not be relied upon. The information contained in this Presentation must be kept strictly confidential and may not be reproduced (in whole or in part) or redistributed in any format without the express written approval of Urban Catalyst Manager II LLC (the “Manager”). By accepting this document, the recipient agrees that it will, and will cause its representatives and advisors to, use the information only to evaluate its potential interest in the Fund and for no other purpose and will not, and will cause its representatives and advisors not to, divulge any such information to any other party. Neither the Fund nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein should be relied upon as a promise or representation as to past or future performance of the Fund or any other entity. Any potential investor considering an investment in the Fund that is on behalf of an employee benefit plan or individual retirement account (or governmental, church, or foreign plan subject to laws similar to those governing employee benefit plans and individual retirement accounts) is strongly encouraged to consult with its own legal and tax advisers regarding the consequences of such an investment.

This Presentation does not constitute a part of the Subscription Package. An investment in the Fund is speculative, entails a high degree of risk, and no assurance can be given that the Fund’s investment objectives will be achieved or that investors will receive a return of their capital. In considering investment performance information contained in this Presentation, prospective investors should bear in mind that past, targeted or projected performance is not necessarily indicative of future results, and there can be no assurance that targeted or projected returns will be achieved, that the Fund will achieve comparable results or that the Fund will be able to implement its investment strategy or achieve its investment objectives. While the Manager’s projected returns are based on assumptions which the Manager believes are reasonable under the circumstances, the actual realized returns on the Manager’s unrealized investment will depend on, among other factors, the value of the asset and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the Manager’s projections are based. Accordingly, the actual realized returns on unrealized investments may differ materially from the Manager’s projected returns indicated herein. There can be no assurance that projected or expected realizations or distributions will occur. Furthermore, prospective investors are encouraged to contact the Manager’s representatives to discuss the procedures and methodologies used to calculate the investment returns and other information provided herein. Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue,” “target” or “believe” (or the negatives thereof) or other variations thereon or comparable terminology. Due to various risks and uncertainties, such as those set forth in the Subscription Package, actual events or results or actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking stadid tements in making their investment decisions.

NOTICE TO INVESTORS

There are substantial risks associated with the federal income tax aspects of an investment in the Company. The income tax consequences of an investment in the Company are complex and recent tax legislation has made substantial revisions to the Code. Many of these changes affect the tax benefits generally associated with an investment in real estate. A further discussion of the tax aspects (including other tax risks) of an investment in the Company is set forth in the PPM under “Federal Income Tax Consequences.” Because the tax aspects of the Offering are complex, and certain of the tax consequences may differ depending on individual tax circumstances, prospective investors are urged to consult with and rely on their own tax advisor concerning the Offering’s tax aspects and their individual situation. No representation or warranty of any kind is made with respect to the Internal Revenue Service’s (the “IRS’s”) acceptance of the treatment of any item by the Company or an investor.

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Congress has recently enacted several major tax bills that substantially affect the tax treatment of real estate investments including, but not limited to, the tax provisions of the CARES Act. These changes will have a substantial effect on the type of activities in which the Company intends to engage, and certain of those effects are set forth under the appropriate subheadings under “Federal Income Tax Consequences.” In many instances, Congressional Committee reports have been relied upon for the interpretation and application of these new statutory provisions. While the Code authorizes the Treasury Department to issue extensive substantive regulations regarding recently adopted Code provisions, few have been issued to date. In addition, Congress could make substantial changes in the future to the income tax consequences with respect to an investment in the Company.