Treasury and the IRS have proposed detailed information reporting rules for qualified opportunity funds, the first major compliance package since Congress made the opportunity zone program permanent in 2025. The proposed regulations, REG-116506-25, became public September 10, 2026 and were published in the Federal Register on September 11. They would require funds to report far more about their holdings and investors, and would attach penalties to those requirements.
What changed
The 2025 tax law made the opportunity zone provisions permanent and added new reporting sections to the Internal Revenue Code, 6039K for funds and 6039L for the businesses they own, along with an assessable penalty under Section 6726, according to an analysis by Current Federal Tax Developments. The proposal fills in how those provisions would work.
- Fund returns. On the annual Form 8996, funds would report their 90% investment standard calculations, valuation methods, the census tracts and industry codes of their holdings, real property values, residential unit counts, and details on each zone business they own, including equity percentages and full-time equivalent employees.
- Investor reporting. Funds would report inclusion events and dispositions during the year, with each investor's name, dates and original contribution, and furnish investor statements by March 1, or January 15 for publicly traded funds. Broker reporting on Form 1099-B would expand to cover fund dispositions.
- Zone business attestations. Corporations and partnerships in which a fund holds an interest would attest, under penalties of perjury, that they meet the program's tangible property, active income, intangible property and financial property tests and avoid excluded businesses.
- Certification. Annual re-certification would give way to the information return. A fund could voluntarily decertify, but would have to notify investors within 15 days that the 10-year basis step-up is no longer available, and decertification would be an inclusion event for all owners.
The penalty math
The proposal describes a $500-a-day penalty for failing to file a complete and correct Form 8996 on time, capped at $10,000 a year for most funds and $50,000 for funds with $10 million or more of assets. Intentional disregard raises those caps to $50,000 and $250,000. Failing to furnish investor or zone business statements would carry $250 per statement, up to $3 million a year.
| Illustrative case | Calculation | Penalty |
|---|---|---|
| Fund with $12 million of assets files Form 8996 30 days late | 30 days x $500 | $15,000 |
| Same fund misses statements to 40 investors | 40 x $250 | $10,000 |
| Fund with $5 million of assets files 60 days late | 60 days x $500, capped | $10,000 |
The figures assume no reasonable-cause relief, which the proposal would extend to the new assessable penalty.
Who is affected
Investors usually enter opportunity funds by rolling in capital gains, so most of the paperwork falls on sponsors. Investors still bear the consequences. A sponsor that decertifies triggers tax for every owner, and late or inaccurate statements can complicate an investor's own return. Families with gains from a business sale or a concentrated stock position who are weighing a fund may find its reporting systems a useful point of diligence, alongside the underlying real estate or business.
Questions for fund sponsors
- How does the fund collect census tract, employee and housing data from each zone business?
- Who prepares Form 8996 and investor statements, and has the fund budgeted for the added work?
- What circumstances would lead the sponsor to decertify, and how would investors be told?
What to watch
Comments are due October 16, 2026, and a telephonic public hearing is scheduled for November 5; requests to speak are due October 13. The CFTD analysis notes the proposal has no general reliance provision, so existing regulations continue to govern, and most new requirements would apply only to returns and statements due after the rules are finalized. Sponsors raising capital now are likely to face the new regime within the life of their funds.
Sources
- First reported Treasury Proposes Comprehensive Qualified Opportunity Zone Information Reporting and QOF Certification Regulations — Current Federal Tax Developments
- Information Reporting Regarding Qualified Opportunity Zones and Updated Qualified Opportunity Fund Certification and Decertification Procedures — Federal Register
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