# Prop. Treas. Reg. § 1.1400Z2(d)-1: Qualified opportunity funds and qualified opportunity zone businesses. Proposed regulation, not in force. REG-115420-18, 91 FR 57968, published 2026-09-11 . Interprets 26 U.S.C. § 1400Z-2. Par. 4. Section 1.1400Z2(d)-1 is amended by: 1. In paragraph (a), revising the second sentence. 2. Revising paragraphs (a)(2) and (3); and 3. Adding paragraph (e)(3). The additions and revisions read as follows: (a) * * * Paragraphs (a)(2) through (4) of this section provide rules that an eligible entity must follow to be certified as a QOF and to revoke an inadvertent self-certification of a QOF, as well as rules for the decertification of a QOF. * * * * * * * * (2) Required self-certification of an eligible entity as a QOF —(i) In general. An entity that satisfies the requirements of paragraphs (a)(2)(ii)(A) through (D) of this section to make an election to self-certify as a QOF will be treated as a QOF from the date the self-certification under this paragraph (a)(2) is effective. (ii) Time, form and manner —(A) Timely filing requirement. The election for a self-certification as a QOF must be timely filed on Form 8996, Qualified Opportunity Fund, or any successor form, in the manner set forth in the instructions to that form by the due date for the eligible entity's original Federal tax return (including extensions) for the first taxable year identified under paragraph (a)(2)(ii)(B) of this section. See paragraph (a)(2)(iii) of this section for information required to be reported by QOFs annually. (B) First taxable year and month identified. The self-certification of an eligible entity as a QOF must identify the first taxable year for which the self-certification takes effect and the first month (in that first taxable year) in which the self-certification takes effect. ( 1 ) Failure to specify first month. If the eligible entity's self-certification as a QOF fails to specify the month in the initial taxable year that the self-certification takes effect, then the self-certification is treated as taking effect in the first month of the entity's taxable year. ( 2 ) Investments made before eligible entity's first month as QOF not eligible for deferral. If an investment in eligible interests of an eligible entity occurs prior to the eligible entity's first month as a QOF, any election under section 1400Z-2(a)(1) made for that investment is invalid and the investment is a non-qualifying investment. (C) Becoming a QOF in a month that is not the first month of the taxable year. This paragraph (a)(2)(ii)(C) applies to an eligible entity if its self-certification as a QOF is first effective for a month that is not the first month of that entity's taxable year. ( 1 ) For purposes of applying section 1400Z-2(d)(1)(A) and (B) in the first year of the QOF's existence, the phrase first six-month period of the taxable year of the fund means the first six months each of which is in the taxable year of the QOF and in each of which the entity is a QOF. Thus, if an eligible entity becomes a QOF in the seventh or later month of a 12-month taxable year, the 90-percent investment standard in section 1400Z-2(d)(1) takes into account only the QOF's assets on the last day of the QOF's taxable year. ( 2 ) The computation of any penalty under section 1400Z-2(f)(1) does not take into account any months before the first month in which an eligible entity is a QOF. (D) Organized for the purpose of investing in qualified opportunity zone property. The self-certification must include an affirmative statement that the entity is organized for the purpose of investing in qualified opportunity zone property. (iii) Annual information requirements under section 6039K. For all taxable years in which the entity is self-certified as a QOF, see § 1.6039K-1 for the information required to be reported annually. (iv) Revoking an inadvertent election to self-certify as a QOF —(A) In general. Except as otherwise provided in this paragraph (a)(2)(iv), an election to self-certify as a QOF made under this paragraph (a)(2) is not revocable. Notwithstanding the previous sentence, an entity that previously made an inadvertent election to self-certify as a QOF may revoke that election if the entity satisfies the eligibility requirement in paragraph (a)(2)(iv)(B) of this section and the revocation is filed in accordance with the procedures set forth in paragraph (a)(2)(iv)(C) of this section. (B) Eligibility for revoking an inadvertent election. An entity self-certified as a QOF may revoke its inadvertent election to self-certify as a QOF only if no qualifying investment in the QOF was made. (C) Procedure for revoking an inadvertent election. An inadvertent election to self-certify as a QOF may be revoked only with the consent of the Commissioner in accordance with guidance published in the Internal Revenue Bulletin or in forms and instructions as to the required time, form, and manner for such consent. (D) No certification at a later date. An entity that has revoked its inadvertent election to self-certify as a QOF under this paragraph (a)(2)(iv) may not self-certify as a QOF at any future date. The taxpayer identification number assigned to the entity that has revoked its inadvertent election to self-certify as a QOF may not be used by any other entity to self-certify as a QOF. (3) Voluntary decertification of a QOF —(i) In general. A QOF may voluntarily terminate its certification as a QOF (voluntary decertification) only if the QOF maintains in its books and records contemporaneous written documentation, as defined in paragraph (a)(3)(iii) of this section, of the QOF's intent to terminate its certification as of the QOF's identified effective date of voluntary decertification. (ii) Final form. The election to voluntarily decertify as a QOF during the QOF's taxable year must be timely filed on a Form 8996, or any successor form, (final information return) in the manner set forth in the instructions to that form by the due date for the eligible entity's original Federal tax return (including extensions) for the taxable year. In addition, the Form 8996 must include the last month that the QOF seeks to be certified as a QOF. (iii) Contemporaneous written documentation. A QOF that chooses to voluntarily decertify as a QOF during its taxable year must maintain in its books and records contemporaneous written documentation, as defined in paragraph (a)(3)(iii)(A) of this section, that memorializes the entity's intent to terminate its certification as a QOF and identifies the last month for which the entity is certified as a QOF. (A) Definition. For purposes of this paragraph (a)(3), the term contemporaneous written documentation means written documentation created at the same time a QOF makes the determination that it will terminate its certification as a QOF. (B) Example of contemporaneous written documentation. An example of contemporaneous written documentation includes meeting minutes memorializing a QOF's intent to voluntarily decertify as of a specific date. (iv) Notification to final investors regarding voluntary decertification —(A) Notification requirement. A QOF that chooses to voluntarily decertify as a QOF during its taxable year must provide a written statement of the voluntary decertification (15-day notification) to each investor that holds a qualifying or non-qualifying investment in the QOF on the QOF's effective date of voluntary decertification (final investor). This 15-day notification is separate from the requirement under section 6039K(c) and § 1.6039K-1(h) that the QOF must furnish investor statements to reportable investors. The 15-day notification must be furnished by the time and in the manner set forth in paragraphs (a)(3)(iv)(B) and (C) of this section. In addition, the 15-day notification must contain— ( 1 ) A statement that informs each final investor referred to in this paragraph (a)(3)(iv)(A) that, if applicable, the election under section 1400Z-2(c) no longer is available for that final investor's qualifying investment because the certification of the entity as a QOF has terminated ( see paragraph (a)(3)(vi)(C) of this section); and ( 2 ) Any information necessary for each such final investor to report, if applicable, an inclusion event on the QOF's effective date of voluntary decertification if the voluntary decertification occurs before the inclusion date specified in section 1400Z-2(b)(1)(B). (B) Time for furnishing 15-day notification. The 15-day notification described in paragraph (a)(3)(iv)(A) of this section must be furnished to each final investor by the earlier of— ( 1 ) 15 days after the QOF's effective date of voluntary decertification, as determined under paragraph (a)(3)(vi)(A) of this section; or ( 2 ) The date contracted upon by the parties for the receipt of such written notification by investors. (C) Manner for furnishing 15-day notification. The 15-day notification required by paragraph (a)(3)(iv)(A) of this section must be made in writing and furnished to the investors using any reasonable manner. (v) Failure to satisfy the voluntary decertification requirements. If a QOF fails to maintain contemporaneous written documentation of the QOF's intent to terminate its certification as required by paragraph (a)(3)(iii) of this section— (A) The voluntary decertification of the QOF will not be valid; and (B) The QOF will continue to be subject to the requirements of section 1400Z-2 and the section 1400Z-2 regulations, as defined in § 1.1400Z2(a)-1(b)(44). (vi) Consequences of a voluntary decertification —(A) Effective date of voluntary decertification. A QOF's voluntary decertification is effective on the last day of the month that the QOF identifies in its contemporaneous written documentation as the last month for which the entity is certified as a QOF. (B) Voluntary decertification is an inclusion event —( 1 ) In general. A QOF's voluntary decertification is binding on the QOF's final investors. Each final investor that is a QOF owner, as defined in § 1.1400Z2(a-1(b)(23), will have an inclusion event, as defined in § 1.1400Z2(b-1(c), with respect to their qualifying investment in the QOF on the QOF's effective date of voluntary decertification. See § 1.1400Z2(b-1(c)(15). ( 2 ) Eligibility for continued deferral of gain arising from an inclusion event due to voluntary decertification. Gain that otherwise is required to be included in gross income by a final investor is eligible for continued deferral if the gain is reinvested in a QOF with a taxpayer identification number (TIN) that is different from the decertified QOF and all requirements to elect to defer eligible gain under section 1400Z-2(a)(1)(A) are satisfied. See § 1.1400Z2(a-1(b)(11)(iv). (C) No section 1400Z-2(c) election permitted. Each final investor that is a QOF owner is not eligible to make an election under section 1400Z-2(c) with regard to the sale or exchange of that investment on any date on or after the QOF's effective date of voluntary decertification. See § 1.1400Z2(c-1(b)(1)(i). (vii) Examples. The following examples illustrate the rules described in this paragraph (a)(3). (A) Example 1: Valid voluntary decertification —( 1 ) Facts. In 2027, individuals A and B formed partnership Q, which uses a calendar taxable year, for the purpose of investing in qualified opportunity zone property. The partnership agreement does not provide for a date by which partners must receive written notification of a voluntary decertification of the partnership's status as a QOF. Q properly self-certified as a QOF as of February 1, 2027, and has thereafter complied with section 1400Z-2 and the section 1400Z-2 regulations, as defined in § 1.1400Z2(a-1(b)(44). A acquired a qualifying investment in Q on February 28, 2027. B has a non-qualifying investment in Q. On June 30, 2030, A and B held a meeting in which A and B determined that Q would voluntarily decertify and that July of 2030 would be the last month that Q is certified as a QOF. Q memorialized the determination to voluntarily decertify and the last month of Q's certification in the meeting minutes for the meeting held on June 30, 2030, and thereafter maintained a copy of the meeting minutes in its records. On August 15, 2030, Q provided written notification to A and B of its voluntary decertification as of July 31, 2030. Q's notification informs A and B that Q is voluntarily decertifying as a QOF and that A and B may have an inclusion event on July 31, 2030, with respect to their investments in Q. Q's notification also informs A and B that they are, if applicable, no longer eligible to make an election under section 1400Z-2(c) on any date on or after July 31, 2030. Q reports its voluntary decertification on its final information return on Form 8996 with its timely filed original 2030 Form 1065, U.S. Return of Partnership Income. Q also reports on Form 8996 that its last month for which Q is certified as a QOF is July of 2030. ( 2 ) Analysis. Q's voluntary decertification is valid because Q followed the procedures set forth in paragraph (a)(3)(i) of this section. Q satisfied the contemporaneous written documentation requirement under paragraph (a)(3)(iii) of this section by memorializing A and B's determination to terminate Q's certification as a QOF in July of 2030, in the meeting minutes for the June 30, 2030, meeting. Q also furnished the written notification of Q's voluntary decertification to its final investors, A and B, within the 15-day period required under paragraph (a)(3)(iv) of this section. Q reported its voluntary decertification on its final information return on Form 8996, which was timely filed on Q's Form 1065 for the taxable year ended December 31, 2030. The result of Q following the procedures set forth in paragraph (a)(3)(i) of this section is that Q's effective date of voluntary decertification date is July 31, 2030, the last day of the month identified in Q's contemporaneous written documentation. See paragraph (a)(3)(vi)(A) of this section. Additionally, on that effective date, A has an inclusion event with regard to A's qualifying investment in Q. See paragraph (a)(3)(vi)(B)( 1 ) of this section. Finally, B does not have an inclusion event with respect to B's investment because B held a non-qualifying investment in Q on Q's effective date of voluntary decertification. (B) Example 2: Disallowance of the election under section 1400Z-2(c) due to a voluntary decertification —( 1 ) Facts. The facts are the same as in paragraph (a)(3)(vii)(A)( 1 ) of this section ( Example 1 ) except that A and B held a meeting on June 1, 2038, and decided to voluntarily decertify Q effective on June 30, 2038. Q memorialized the determination and the last month of Q's certification in the meeting minutes for A and B's meeting on June 1, 2038, and thereafter maintained a copy of the meeting minutes in its records. On July 15, 2038, Q provided a notification of its voluntary decertification to both A and B in accordance with paragraph (a)(3)(iv) of this section. On July 1, 2039, A sells A's investment in Q. ( 2 ) Analysis. The analysis regarding whether Q followed the procedure for voluntary decertification set forth in paragraph (a)(3)(i) of this section is the same as in paragraph (a)(3)(vii)(A)( 1 ) of this section except that Q's effective date of voluntary decertification is June 30, 2038. In addition, in determining the amount of gain recognized by A upon A's sale of its partnership interest in Q, A is not permitted to make an election under section 1400Z-2(c) with regard to A's sale. See paragraph (a)(3)(vi)(C) of this section. A did not hold a qualifying investment in Q at the time of A's sale because Q was not certified as a QOF on the date of the sale. See § 1.1400Z2(c)-1(b). * * * * * (e) * * * (3) Applicability date. The rules of paragraphs (a)(2) and (3) of this section apply to taxable years ending on or after [date of publication of final regulations in the Federal Register ].