QOZs & QOFs Explained
The QOZ program was created to revitalize economically distressed communities using private investments. Defined under the 2017 Tax Cuts and Jobs Act, QOZs are census tracts (permanent statistical subdivisions of a county) composed of economically disadvantaged communities. The census tracts are currently being reviewed and after the nomination process concludes, the Secretary of the Treasury will designate and certify the nominated census tracts as QOZs. The IRS and Treasury are expected to officially publish newly designated QOZs in December 2026, which will go effective January 1, 2027.
A Qualified Opportunity Fund (QOF) is an investment vehicle typically structured as a partnership or corporation for U.S. federal income tax pruposes and is responsible for investing in QOZ property or properties. QOFs are required to hold at least 90 percent of their assets in QOZ businesses and assets and are required to meet additional requirements.
Claim Refined Tax Benefits Now
An individual who reinvests capital gain in an eligible QOF is potentially suitable for favorable tax treatment in the form of tax deferral, potential gain reduction, and tax-free appreciation after a 10-year hold, based on QOZ 2.0 reforms. Taxable gains from the sale or exchange of virtually any type of property may potentially be deferred by reinvesting such proceeds in a QOF within 180 days of the sale or exchange (exceptions exist for gain from passthrough entities).
- 5-year rolling capital gains deferral
- Reduction of deferred gain after 5 years (10% basis step-up; 30% step-up for certain rural investments)
- 100% tax elimination after 10+ year hold on QOF
QOZ 2.0 Important Dates and Deadlines
State governors can propose a new set of QOZ census tracts for federal approval and by integrating acquisitions, dispositions, financing, market intelligence, underwriting, and due diligence, Inland can optimize identifying and evaluating newly designated QOZ 2.0 census tracts as potential investment opportunities.
State nomination deadline to identify new Opportunity Zones, which include a standard 30-day extension to the nomination period
IRS and Treasury officially publish new Opportunity Zones
Kick-off of new QOZ 2.0 program