IRS proposes reporting rules for Qualified Opportunity Funds and investors

The Internal Revenue Service (IRS) and the Treasury Department have issued a notice of proposed rulemaking that would implement new statutory information-reporting and investor-statement obligations for Qualified Opportunity Funds (QOFs) and qualified opportunity zone businesses (QOZBs). The proposal, published in the Federal Register of September 11, 2026, under reference REG-116506-25 (RIN 1545-BR82), would affect tax compliance for QOF investors nationwide.

The rules carry out section 70421 of the One Big Beautiful Bill Act (OBBBA), Public Law 119-21, 139 Stat. 72, enacted July 4, 2025. That law added new Code sections 6039K and 6039L and a new information-reporting penalty under section 6726, requiring QOFs to file annual returns with the IRS and to furnish statements to investors who dispose of their interests, while QOZBs must furnish statements to the QOFs that hold interests in them.

New reporting obligations for QOFs and QOZBs

Under proposed § 1.6039K-1, every QOF would file an annual information return on Form 8996 (or a successor form), reporting details on its operations, investments, and any disposition events affecting investors during the year. QOFs would also be required to furnish investor statements to every investor who disposed of some or all of a qualifying or non-qualifying investment during the year, including the investor’s name, address, taxpayer identification number, and the dates and amounts of acquisition and disposition.

Proposed § 1.6039L-1 would require each applicable QOZB to furnish a written statement to each relevant QOF, signed under penalties of perjury, covering the QOZB’s ownership, tangible property, census tracts, residential units, and full-time equivalent employees. Brokers holding QOF interests on behalf of customers would report disposition events on Form 1099-B, and the proposal would expand the definition of a reportable sale to include inclusion events from voluntary decertification.

Penalties for non-compliance

The proposal clarifies the penalties for failing to file or furnish the required returns and statements:

• Section 6726 imposes a $500 per-day penalty for failing to file a section 6039K return, capped at $10,000 per return, rising to $50,000 for large QOFs with gross assets exceeding $10 million.
• For failures due to intentional disregard, the daily penalty rises to $2,500, with caps of $50,000 (or $250,000 for large QOFs).
• Investor statements and QOZB statements are treated as “payee statements” subject to the $250 (inflation-adjusted) penalty under section 6722.
• The reasonable-cause waiver under section 6724 would apply to the new section 6726 penalty.

Certification, applicability, and next steps

The proposal would also clarify the QOF self-certification rules and provide procedures for QOFs to revoke inadvertent certifications or voluntarily decertify. The rules on certification and QOZ business property would apply to taxable years ending on or after publication of the final regulations, while the information-return and statement rules would apply to returns and statements filed or furnished on or after that date.

Written or electronic comments must be received by October 16, 2026, and a telephonic public hearing is scheduled for November 5, 2026, at 10:00 a.m. ET. Requests to speak and outlines of topics are due by October 13, 2026, and requests to attend by November 3, 2026. The principal authors are Roseann Cutrone and Dominic DiMattia of the Office of Associate Chief Counsel, with participation from Jane Murphy and Rishi Jain.

The proposal matters because it gives QOFs, QOZBs, and their investors the first concrete compliance framework for the OBBBA’s reporting regime, affecting an estimated 11,300 QOFs and roughly 7,900 QOZBs nationwide. For the roughly 99.8 percent of QOFs that are small entities, the IRS estimates an annual burden of about 14,100 hours and $885,903 in monetized costs to complete the updated Form 8996.

Source: Federal Register, Vol. 91, No. 175, September 11, 2026, Proposed Rules, p. 57968 (official reference: REG-116506-25, RIN 1545-BR82).