On September 25, 2019, the IRS published a draft of the form on which an eligible investor in a qualified opportunity fund (QOF) must report to the IRS his, her or its QOF investments. Less than a week later, the White House opened its opportunity zones website to the public.
New Filing Requirement:
A QOF investor must now file Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, which is in addition to the requirement that a QOF investor file Form 8949, Sales and Other Dispositions of Capital Assets, the form on which a QOF investor elects to defer the recognition of capital gain by reinvesting such gain in a QOF. This new form is also in addition to the form a QOF must file to self-certify as a QOF and report compliance with the 90 percent asset test, Form 8996, Qualified Opportunity Fund.
Specifically, a QOF investor, which includes individuals, C corporations, regulated investment companies (RICs), real estate investment trusts (REITs), partnerships, S corporations, trusts and estates, will use Form 8997 to report the following:
- Total QOF investments held at the beginning of this current tax year, including the amount of deferred short-term and long-term capital gain.
- Short-term and long-term capital gains deferred in the current tax year by making QOF investments.
- QOF investments disposed of during the current tax year, including the amount of short-term and long-term capital gain now included in taxable income.
- Total QOF investments held at the end of the current tax year, including the amount of short-term and long-term capital gain deferred due to current tax year deferral and previous years’ deferral.
We recommend that QOFs alert their respective investors of the newest IRS form, and that QOF investors consult with their tax advisors to ensure compliance with all reporting requirements.
On October 1, 2019, the White House Opportunity and Revitalization Council, which includes representatives from federal agencies and federal-state partnerships, launched its new opportunity zones website https://opportunityzones.hud.gov/. This website serves as an information resource center for all parties engaged in the opportunity zones initiative, including relevant legislation and tax forms, frequently asked questions, an interactive map of qualified opportunity zones and tool-kits for investors, local leaders and entrepreneurs desiring to get involved in the initiative.