On April 12, 2022, the Internal Revenue Service announced that taxpayers participating in the Qualified Opportunity Zone program who need to take additional actions would receive notice letters later in April. This announcement follows the issuance of a report by the Treasury Inspector General for Tax Administration on February 7, 2022, finding significant non-compliance in the Qualified Opportunity Zone program.
Together, the February report and recent announcement by the Internal Revenue Service show that Opportunity Zone compliance is coming under additional scrutiny. Those involved in the program should be on the lookout for letters and ensure that they are in a position to respond to letters received from the Internal Revenue Service regarding their compliance. Specifically, taxpayers who attached Form 8996 to their returns may receive Letter 6501 notifying them of additional information needed to support the annual certification of the Qualified Opportunity Zone Fund, including notifying the taxpayer of missing or invalid information and unsupported calculations of the investment standard. Taxpayers who file Form 8997 may receive Letter 6502 or 6503, notifying the taxpayer that they may not have properly followed the instructions for Form 8997 as it appears that information may be missing, invalid, or that the requirements to maintain the investment in a Qualified Opportunity Fund may not be met.
