Opportunity Zone Program: Compliance Requirements

A QOF must file Form 8996 annually with its timely filed federal income tax return (including extensions) to report compliance with the 90% investment standard, even if the corporation or partnership has no taxable income.

Deadline: Due with QOF's timely filed federal tax return (including extensions)

Source: 26 USC 1400Z-2(f); IRS Form 8996 and instructions; https://www.irs.gov/newsroom/opportunity-zones

Under the One Big Beautiful Bill (OZ 2.0, effective 2025), QOFs must report to the IRS on total assets, QOZ property value, NAICS codes, census tract locations, tangible/intangible property values (owned vs. leased), number of residential units, and approximate full-time employees. Regulations forthcoming.

Deadline: Timing to be specified in future IRS regulations (as of June 2026, regulations not yet finalized)

Source: 26 USC 6039K, 6039L (added by One Big Beautiful Bill Act, P.L. 119-21); Seyfarth Shaw analysis; https://home.treasury.gov/policy-issues/tax-policy

QOFs must report disposal or disposition of investor equity interests (whether for consideration, by gift, or by inheritance) and provide investor reports on dispositions of QOF investments.

Deadline: Upon each investor disposition; timing and method to be specified in future regulations

Source: 26 USC 6039L (added by One Big Beautiful Bill); https://www.irs.gov/credits-deductions/businesses/certify-and-maintain-a-qualified-opportunity-fund

A QOF must hold at least 90% of its assets in qualified opportunity zone property, measured on the last day of the first 6-month period and the last day of the taxable year, or pay a monthly penalty for every month it fails to meet this standard.

Deadline: Testing dates: end of first 6-month period and end of taxable year; monthly penalty assessed for non-compliance

Source: 26 USC 1400Z-2(d)(1); IRS Form 8996 instructions; Treasury Regulations

QOF-owned tangible property must be qualified OZ business property: acquired by purchase after Dec. 31, 2017, either with original use commencing with the QOF or substantially improved, and used substantially all the time in the QOZ.

Deadline: Must be maintained throughout QOF's holding period; tested at each annual compliance measurement date

Source: 26 USC 1400Z-2(d)(2); IRS Form 8996 Part V; Treasury Regulations §1.1400Z2(d)-1

A QOZ business must earn at least 50% of gross income from business activities within a qualified opportunity zone, and at least 70% of owned or leased tangible property must be qualified OZ business property.

Deadline: Must be demonstrated for each taxable year; tested on Form 8996 Part VI

Source: 26 USC 1400Z-2(d)(3); IRS regulations; https://www.irs.gov/credits-deductions/businesses/certify-and-maintain-a-qualified-opportunity-fund

For standard QOZs, tangible property must be substantially improved by increasing the adjusted basis by at least 100% of the initial basis within 30 months of acquisition (or 50% for rural QOZs as of July 4, 2025).

Deadline: 30 months from property acquisition date

Source: 26 USC 1400Z-2(d)(2)(B); Notice 2025-50 (rural substantial improvement threshold); Treasury Regulations

QOF must maintain documentation showing that QOZB meets the 50% gross income test and 70% tangible property test, and that all property satisfies original use or substantial improvement requirements.

Deadline: Records must be maintained contemporaneously and made available for IRS examination

Source: 26 USC 1400Z-2(d)(3); Treasury Regulations §1.1400Z2(d)-1; IRS Form 8996 instructions