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New Reporting Requirements for Opportunity Funds

This week taxpayers got a preview of what the new tax reporting requirements for 2019 could look like with respect to Qualified Opportunity Funds. On October 30th, the IRS released a Draft Form 8996, the tax form that Opportunity Funds use to self-certify compliance with Opportunity Zone rules.

The initial version of Form 8996 was released when the Tax Cuts and Jobs Act (TCJA) first went into effect. Given the complexity of the Opportunity Zone rules, many practitioners were surprised by how little reporting the original form requires. As the saying goes, if it seems too good to be true, it probably is.

The new Draft Form 8996 requires much more disclosure than the current version. If the form is adopted, Opportunity Funds would have to report detailed information about their Opportunity Zone property, which could be a substantial pain. Hopefully, Opportunity Fund managers have already begun keeping detailed information on their Opportunity Zone property(ies) to ensure compliance, even though disclosure isn’t required on the current tax form.

Both the current and draft versions of Form 8996 can be found on our Opportunity Zone Resource Center. If you have questions on the Opportunity Zone rules or reporting requirements, please feel free to contact Tim Ulen, PP&Co Real Estate Industry Group Chair, at tulen@ppandco.com.