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.
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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?
Answers
After Dec. 31, 2017.
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.
There is no date before which an entity could be formed and fail to be a QOF. A QOF must satisfy all of the statutory rules to be a QOF and can pick the first month in a tax year that it wants to qualify as a QOF. You should discuss this issue with your accountants or legal advisors. As you know, the QOZ provisions of the Internal Revenue Code are very complicated and the complying with highly technical rules are key to obtaining the benefits.
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.
No limit. However, I wouldn't want to use an entity with assets in it already. If assets are not purchased after Dec. 31, 2017, you will have headaches with asset qualification rules. If it's an old, largely empty entity, you can use it to save some set up fees (or do an asset over division of the LLC by having the entity form a single-member LLC that's then distributed to owners). Or just avoid the headaches and set up a new clean entity. In many cases, it is advised to have a pristine structure. This is my recommendation to you without knowing more.
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.
There is no date after which a QOF must have been formed but once it selects to be a QOF, 90% of all of its assets need to be Qualified Opportunity Zone Property, even the assets acquired before it elected to be a QOF.
No such requirement.
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