There's a penalty assessed monthly, and if non-compliance is frequent or severe enough, the IRS can move to decertify the fund.
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What happens if a QOF fails and there is no reasonable cause?
What happens with the investment funds?
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It would depend on the failure, but likely it will accelerate the tax.
If a qualified opportunity fund (QOF) fails to meet the 90% requirement, and the reasonable cause exception is not available, the QOF will be subject to a penalty for each month it fails to meet the requirement in an amount generally equal to the amount by which it misses satisfying the 90% requirement, multiplied by the underpayment rate for the month. The QOF would retain the funds that have been invested (net of any amount paid as a penalty).
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