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If a QOF can be an entity that predates the effective date of the OZ regulations, how far back can it go?

Is there a set date for how far back the entity can have been established and still quality for a QOF?

  • Brad Cohen
    August 09, 2019

    After Dec. 31, 2017.

  • Pat Cardwell
    August 07, 2019

    I am not sure I understand your question. I would think you can go back to the time the statute is effective or the date the OZs are designated. In other words you need the statute, not necessarily the regulations, to get going.

  • Matthew Rappaport
    August 07, 2019

    No, any eligible entity can be a QOF, but the election is made as of a certain month, which you must choose on IRS Form 8996.

  • John Wegmann
    August 07, 2019

    The proposed regulations clarify that there is no prohibition on utilizing a pre-existing entity as a QOF or as a subsidiary entity operating a qualified opportunity business, provided that the pre-existing entity meets the requirements under Sec. 1400Z-2(d)(2), which specify the type of entity and various asset tests, among other requirements. The code and proposed regulations are silent as to how far back the entity could have been established, and I conclude there is no restriction. That said, pre-existing shares or or partnership interests are not entitled to QOF benefits.

  • Blake Christian
    August 06, 2019

    A QOF that is the investment vehicle under the OZ program must generally be established after 2017, the effective date of the OZ program. While a C corp, S corp or partnership that was formed prior to 2018 might qualify as a QOF, it will generally be difficult in that any assets owned prior to 2018 will not be QOZ property and may jeopardize the 90% qualified asset for the QOF or the 70% qualified asset test for the QOZB. If the QOF investors plan on investing a large percentage of additional dollars into new equipment after purchase, then the tests may be met. Generally, it is easier to form a new QOF then purchase the assets of a business not currently located in an OZ and move it into an OZ, or start a business from scratch and put the assets into a QOZB.

  • Neil Faden