This is both a statutory and regulatory requirement, and Form 8996 has a question asking the sponsor to affirm the entity was organized as a QOF. Without the clause, you could put the entity at risk for decertification.
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Why must a QOF’s organizing documents contain a clause stating the exclusive purpose of the entity is to serve as a QOF?
What happens if it doesn’t have the clause?
Answers
You don’t qualify as a QQF.
I understand it is a requirement of the law and regulations.
The statute requires that the QOF be formed for the purposes of opportunity zone investment. The QOF certification form also asks this so most practitioners are careful to put the recital in the formation document. Personally, I feel intent could be demonstrated with the election made and how the investment is made in an opportunity zone and that some IRS safe harbor might be established around this in the future, but for now, I continue to share with taxpayers that the recital should be included in the formation documents and that if it is not that the OZ tax benefits may not otherwise be received.
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