An overview
The U.S. Treasury released proposed rules that would make Form 8996 a standalone return and expanded reporting for Qualified Opportunity Fund (QOF) and Qualified Opportunity Zone Businesses (QOZB). These are proposed regulations only, and nothing has been finalized or is required at this time. The rules remain open for public comment, and some provisions could still change before the IRS adopts the final regulations.
If you invest in or sponsor a QOF, some meaningful reporting changes may be on the way. The One Big Beautiful Bill Act (OBBBA) introduced expanded reporting requirements for QOFs and QOZBs. However, last week the Treasury published its proposed regulations outlining expectations for information reporting and applicable deadlines.
The short version: The Treasury is seeking more visibility into where opportunity zone (OZ) dollars are going, how many jobs are being created, and what’s happening with property and investor activity within each fund.
Here’s what the proposed regulations would require.
How would Form 8996 change under the proposed regulations?
This is one of the more significant shifts in the proposal, and it’s easy to miss. Currently, Form 8996 is filed as part of a QOF’s partnership (or corporate) tax return. Under the proposed rules, Form 8996 would become its own standalone annual information return subject to a separate set of filing requirements.
While this may sound like a technical distinction, it would affect the form’s due dates, extensions, and penalties. Treating Form 8996 as a standalone return would also provide the framework for enforcing the proposal’s new penalties for non-compliance.
What new information would QOFs and QOZBs need to report?
Form 8996 itself is also proposed to significantly expand. QOFs would report details like:
- Property addresses by census tract
- NAICS industry codes
- Employee counts
- Substantial improvement progress
- Ownership percentages in underlying QOZ businesses
For the first time, QOZBs would also have their own reporting obligations, sending detailed annual statements up to their QOF investors, which would then feed into the QOF’s own filing. As currently proposed, a calendar-year QOZB would need to furnish all the required information to its QOF investors by February 1st.
Not only did the OBBBA significantly increase the reporting requirements for a QOZB, but the proposed rules would also add accelerated timelines for reporting all required information to its QOF investors well in advance of its filing deadlines.
When an investor disposes of their QOF investment, the QOF’s disclosure requirements will expand, and information will be due to investors before a QOF’s tax return is due.
How would the proposed rules change QOF decertification?
The proposal also lays out a clearer process for some businesses that inadvertently made an election to be a QOF but never intended to. The rules would be clean for a QOF to voluntarily wind down its OZ status, including a requirement to promptly notify investors within 15 days once that decision is made.
What penalties apply for missing QOF and QOZB reporting requirements?
The OBBBA introduced new penalties for QOFs and QOZBs that did not meet the new reporting requirements. The proposed rules lay out the way these penalties would be applied and under what circumstances. The good news is there could still be relief if there is reasonable cause.
What should you do now?
These rules are not final yet. The proposed regulations remain open for public comment, and the IRS could revise them before issuing final guidance. Comments are due October 26, 2026, and a public hearing is scheduled for November 5, 2026.
However, most of the new reporting requirements are mandated by the OBBBA and will apply to tax years beginning after July 4, 2025, which generally means the 2026 calendar year.
The message for QOF sponsors and QOZBs is clear: now is the time to start planning how they will collect, track, and report the required information.
Have questions about how these proposed changes might affect your Opportunity Zone investment or fund? Aprio’s Opportunity Zone team can walk you through what these proposed rules could mean for your specific situation.