Revised QOF Reporting Requirements You Need to Know

November 12, 2019

By Geoffrey Smith

On October 31, 2019, the U.S. Treasury Department and the Internal Revenue Service released proposed Form 8996 for Qualified Opportunity Funds (“QOFs”). The revised form adds parts V, VI and VII, which require QOF owners to report the employer ID number of each business in which the QOF has an ownership interest, the census tract location of the tangible property of the business, the value of the QOFs’ investments, and the value and census tract location of qualified business property it owns or leases directly. Access the draft here.   

Purpose of the Form

Form 8996 is used by corporations and partnerships to certify that each is organized to invest in Qualified Opportunity Zone (“QOZ”) property. Taxpayers must file the form in a timely manner along with their federal tax returns.

Information to Report

The form is divided into seven parts:

Part I – The taxpayer certifies it is organized for the purpose of investing in QOZ property.

Part II – The taxpayer reports total QOZ property held by the taxpayer on the last day of the first six- month period of the taxpayer’s tax year and the total assets held by the taxpayer on the last day of the first six-month period of the taxpayer’s tax year.

Part III – The taxpayer calculates the 90% asset test to determine if it meets the investment standard.

Part IV – The taxpayer reports total assets on the last day of the month for the first six-month period of the taxpayer’s tax year.

Part V – The taxpayer reports every census tract where the QOZ business property directly owned or leased by the taxpayer is located, including the census tract number, owned property and leased values.

Parts VI and VII – The taxpayer reports every QOZ business in which the tangible property of the QOZ business is located for every QOZ business in which the taxpayer holds stock or partnership interests, including the census tract number, employer ID number of the QOZ business, investment value, and owned and leased property values.

The Treasury Department believes that capturing this type of investment information from the different tracts will help policymakers and the public evaluate the effects of this tax incentive. It will also help to understand why some locations may be more successful than in others in attracting investment.

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