Is there anything we should be careful about when it comes to the certification of a QOF?
Continually not meeting QOF qualification requirements would be an issue. I would be concerned if there were penalties applied for more than two testing periods, because of the penalty leakage and for rising risk of decertification. A QOF must be more than 90% invested in qualifying assets and a QOZB more than 70% in qualifying assets.
The IRS has not yet given specific guidance about decertifying QOFs, but the two obvious situations that come to mind are repeated failures of the 90% test, and abusive structures that are manifestly contrary to the objectives of the OZ program.
Failing any of the tests or failing to file IRS forms each year.
Not compliance with the requirement of an investment of 90% of its assets in QOZP. Still, the regulations do not provide the "when and how."
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