The Probes Into Opportunity Zones Continue
In our March 14th blog post titled “Opportunity Zones in 2022: A Political Analysis,” we shared an important action undertaken by Senate Finance Committee Chairman Ron Wyden (D-Oregon), who launched a detailed investigation into several specifically identified Qualified Opportunity Funds (QOFs) with investments in the real estate sector.
Recently, Senator Wyden sent letters to certain cryptocurrency mining companies, with similar inquiries to those previously made in letters to real estate industry QOFs, including:
- Expected number of permanent jobs created
- History on each property, including when the project was conceived
- Anticipated tax benefits associated with the project investment
Observation: It is clear that Congress is seeking to fully understand the scope of certain opportunity zone investments and whether such investments are fulfilling the policy intentions of the program.
On April 12th, the IRS announced that certain letters may be sent to QOFs and their investors regarding additional information that may be needed. These letters include the following:
- Letter 6501, Qualified Opportunity Fund (QOF) Investment Standard. A QOF receiving this letter may need to supply additional information to support the annual certification of the 90% investment standard that is calculated on Form 8996.
- Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments, or Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments. Taxpayers who have invested in QOFs may receive this letter if additional information is needed to properly reflect their holding of a qualifying investment in a QOF reported on Form 8997.
Observation: Taxpayers that receive one of the aforementioned letters should acknowledge and take action; in other words, do not ignore the letter. Failure to take action in response to these inquiries, including actions that may be critical to maintaining OZ eligibility, may have significant tax and financial consequences to QOFs and/or their owners.
Since the opportunity zone program’s inception, CLA has become a leader in the opportunity zone compliance and consultation space. CLA’s national team of subject matter experts can assist you in maintaining compliance with your QOF investment. Please reach out to Brian Duren or Ben Darwin for more information or to schedule a consultation.
CLA Wealth Advisory also has qualified opportunity zone investment opportunities that are available now, either through funds or direct deals. Please contact a CLA Wealth Advisor or our Capital Markets team to learn more.
Thanks to Brian for another quality and perfectly-timed blog post!
- Carey M. Heyman, CPA
- Managing Principal of Industry - Real Estate
- CliftonLarsonAllen LLP
- Century City (Los Angeles)
Carey is the Managing Principal of the Real Estate Industry at CLA. He is a trusted advisor with close to 20 years of experience providing accounting, assurance, tax, and consulting services to real estate industry owners, operators, family offices, developers and syndicators. Carey has a strong track record of helping clients build and retain capital by leveraging tax- and cost-saving strategies and employing tax credits and incentives. He also consults with high net worth individuals, large family groups, and owners of closely-held businesses on all aspects of tax planning, estate planning, and retirement planning.
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