Background
The QOZ incentive, originally created by the Tax Cuts and Jobs Act (TCJA), was designed to encourage long-term investments in low-income urban and rural communities designated as QOZs. The program allows investors to defer and potentially reduce tax on capital gains if they invest those gains into a Qualified Opportunity Fund (QOF), which is a vehicle that invests in eligible QOZ property. The rules governing these investments are detailed in IRC § 1400Z-1 and IRC § 1400Z-2.
On July 4, 2025, the OBBB was enacted, which significantly amended these rules. The new notice provides critical transitional guidance to help taxpayers navigate the changes between the prior law and the new provisions enacted by the OBBB.
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