The answer depends on your state of residency as well as the state you are making an investment into. For example, if you reside in a state that has adopted the OZ program and then invest in another state that has not, you will generate tax in that other state when you have taxable income on the OZ fund investment or when you sell the investment (even after a 10-year hold). If the investment is held through an LLC/ partnership or S corp, and the OZ fund is and LLC or S corp, then you will likely pay tax in that non-resident state. Note you will not get a state tax credit in your home state. Also note that you will have a starting tax basis in the other state of your full purchase price since there is no gain deferral in that state, so your future gain will be less than in your home state. If the OZ investment is an operating business and meets the small business stock rules of IRC Section 1202 (certain industries are ineligible), then investors should consider electing C corp treatment before they reach $50 million in value. This can provide flexibility on exiting the investment between years five and 10 and if you can find a buyer of your stock, the gain will generally not be sourced to the non-resident state since you are selling an intangible.