In short: Treasury and the IRS have proposed regulations (REG-116506-25) that would put real teeth behind Opportunity Zone reporting. A qualified opportunity fund (QOF) that files late or incorrectly could owe $500 a day. Nothing is final: comments are open and a hearing is set for November 5, 2026.

What was proposed

On September 10, 2026, Treasury and the IRS released proposed regulations implementing the information-reporting rules Congress added to the Opportunity Zone program in the 2025 tax law. The Federal Register publication was scheduled for September 11. The rules draw on three new Code sections: section 6039K (the fund's annual return and investor statements), section 6039L (statements that operating businesses give the fund), and section 6726 (the penalty).

Under the proposal, Form 8996 becomes a standalone annual information return. According to a Vinson & Elkins client alert, it would cover the fund's 90% investment test and valuation method, data on each operating business the fund holds, and details of each investor disposition. A "disposition" is broader than a sale; any event that triggers recognition of deferred gain counts.

The penalties

The proposal restates the section 6726 penalty for a QOF that fails to file a timely, correct return: $500 for each day the failure continues, capped at $10,000 per return. The cap rises to $50,000 for a "large" QOF, meaning one with gross assets above $10 million at year-end. Where the failure is intentional disregard, the daily amount rises to $2,500 and the cap to $50,000, or $250,000 for a large QOF. All of these amounts are adjusted for inflation.

Statements to investors and from operating businesses

Funds would furnish statements to investors who dispose of their interests, generally by March 1 of the following year, according to the Vinson & Elkins summary. Operating businesses would have to give the fund a statement signed under penalties of perjury, with census-tract data and an attestation of compliance. The firm reads the due date as the first day of the second month after the business's tax year ends, which is February 1 for calendar-year businesses. Funds that depend on those statements will want contractual deadlines well ahead of their own.

Certification and getting out

The draft also fills in how a fund becomes, and stops being, a QOF:

  • Self-certification is made on a timely filed Form 8996 for the entity's first year. No yearly recertification is required.
  • A certification made by mistake could be revoked only if the entity never made a qualifying investment, and only with the IRS Commissioner's consent. Per the V&E alert, revocation is permanent.
  • A voluntary decertification needs written documentation of the decision, a final Form 8996, and notice to every investor within 15 days of the decertification date, or sooner if the fund's documents say so.
  • Decertification triggers an inclusion event for investors as of the last day of the documented month. Gain can still be deferred if reinvested within 180 days in a QOF with a different taxpayer identification number.

Timing and what to watch

If finalized, the rules would apply to returns and statements originally due on or after the date the final regulations are published, so they are not retroactive. Comments are due 45 days after Federal Register publication, which is about October 26 if publication happened on September 11 as scheduled. A telephonic public hearing is set for November 5, 2026 at 10:00 a.m. ET; requests to speak and outlines are due 30 days after publication.

Fund managers and operating businesses may want to check three things before then: whether their documents set a deadline for operating-business statements, whether they hold written records of any planned wind-down, and whether their systems can capture the investor-level data the new Form 8996 would ask for. Final rules may differ from this draft.

Sources

This is plain-English information, not tax advice.