QOZB test checker
Updated
Check a qualified opportunity zone business against each numeric test in the regulations, and the fund that owns it against the 90% investment standard.
QOZB (the business the fund invests in)
QOF (the fund)
| Test | Result | Needs | |
|---|---|---|---|
| 70% tangible property | 75.0% | ≥ 70% | Pass |
| 50% gross income | 70.0% | ≥ 50% | Pass |
| 40% intangibles used in the zone | 60.0% | ≥ 40% | Pass |
| 5% nonqualified financial property | 3.3% | < 5% | Pass |
| Working capital safe harbor (max 31 months) | 30 months | ≤ 31 months + written plan | Pass |
| 90% QOF asset test (average) | 91.0% | ≥ 90% | Pass |
A screening aid, not a determination. It doesn't check the "sin business" exclusion, the gross-income safe harbors (hours, services, management), the tangible-property valuation method or monthly figures. Not tax advice.
The tests
| Test | Threshold | Source |
|---|---|---|
| Tangible property that is QOZ business property | ≥ 70% | IRC §1400Z-2(d)(3)(A)(i); Reg. §1.1400Z2(d)-1(d)(2); property defined in §1.1400Z2(d)-2 |
| Gross income from active conduct in the zone | ≥ 50% | IRC §1397C(b)(2); Reg. §1.1400Z2(d)-1(d)(3)(i) |
| Intangible property used in that active conduct | ≥ 40% | IRC §1397C(b)(4); Reg. §1.1400Z2(d)-1(d)(3)(ii) |
| Nonqualified financial property (average unadjusted bases) | < 5% | IRC §1397C(b)(8), (e)(1); Reg. §1.1400Z2(d)-1(d)(3)(iv) |
| Working capital safe harbor | 31 months (up to 62; +24 in a declared disaster) | Reg. §1.1400Z2(d)-1(d)(3)(v)-(vi) |
| QOF assets in QOZ property | ≥ 90% average of two dates | IRC §1400Z-2(d)(1); Form 8996 instructions |
Working capital that meets the safe harbor is excluded from nonqualified financial property, and tangible property bought with it is treated as QOZ business property while the plan runs (Reg. §1.1400Z2(d)-1(d)(3)(v)-(vi)). The fund's own test is on the Form 8996 calculator, with the penalty.
FAQ
What is a qualified opportunity zone business (QOZB)?
A trade or business in which substantially all (at least 70%) of the tangible property owned or leased is qualified opportunity zone business property, that meets the §1397C(b)(2), (4) and (8) requirements, and that is not a "sin business" (IRC §1400Z-2(d)(3); Treas. Reg. §1.1400Z2(d)-1(d)).
What is the 70% tangible property test?
At least 70% of the tangible property owned or leased by the business must be qualified opportunity zone business property (Treas. Reg. §1.1400Z2(d)-1(d)(2)).
What are the 50%, 40% and 5% tests?
At least 50% of gross income from the active conduct of a business in the zone; at least 40% of intangible property used in that active conduct; and less than 5% of the average aggregate unadjusted bases in nonqualified financial property, with reasonable working capital excluded (IRC §1397C(b)(2), (4), (8); Treas. Reg. §1.1400Z2(d)-1(d)(3)).
How long is the working capital safe harbor?
Working capital must be designated in writing and spent under a written schedule within 31 months. A start-up can use more than one 31-month period, up to 62 months, and a business in a federally declared disaster zone can get up to 24 more months (Treas. Reg. §1.1400Z2(d)-1(d)(3)(v)-(vi)).
What is the 90% test for a QOF?
A QOF must hold at least 90% of its assets in qualified opportunity zone property, measured as the average of the last day of the first 6-month period and the last day of the tax year (IRC §1400Z-2(d)(1); Form 8996 lines 7-15).
Not tax advice. A screening aid only; it doesn't apply the sin-business exclusion, the gross-income safe harbors or the valuation methods. Confirm with a tax professional.