IRS to Issue Opportunity Zone Compliance Letters
On April 12, 2022, the Internal Revenue Service ("IRS") announced that taxpayers participating in the Qualified Opportunity Zone ("QOZ") program who need to take additional actions would receive notice letters later in April. This announcement follows the issuance of a report by the Treasury Inspector General for Tax Administration on February 7, 2022, finding significant non-compliance in the Qualified Opportunity Zone program.
Together, the February report and the IRS' recent announcement show that QOZ fund compliance is coming under additional scrutiny. QOZ fund program participants should be on the lookout for these letters and prepare to respond to additional compliance requests. Specifically, taxpayers who attached Form 8996 (Qualified Opportunity Fund Certification) to their returns may receive Letter 6501 notifying them of additional information needed to support the QOZ fund annual certification. Taxpayers who file Form 8997 (Initial and Annual Statement of Qualified Opportunity Fund Investments) may receive Letter 6502 or 6503, notifying the taxpayer that they may not have properly followed the instructions for Form 8997 as information may be missing, invalid, or that the requirements to maintain the investment in a Qualified Opportunity Fund have been met.
If you have any questions regarding the IRS' increased push on QOZ compliance or advice regarding responding to the letters described above, please contact your Quarles & Brady attorney or: