SECTION 3. TRANSITIONAL
Internal Revenue Bulletin 2026-28 · 2026-10-03 edition · updated 2026-10-04 · United States
GUIDANCE REGARDING SECTION 1400Z-1
.01 QOZ designations under the OBBBA .
(1) Application of 25-percent limita- tion . Prior § 1400Z-1(d)(1) provided that, except as provided in prior § 1400Z-1(d) (2) 2 and (b)(3) (deemed designation rule for Puerto Rico), the number of designated QOZs may not exceed 25 percent of the total number of LIC population census tracts in the State (25-percent limitation). Section 70421(a) of the OBBBA amended prior § 1400Z-1 to apply the 25-percent limitation on the number of QOZ designations made during any period. Specifically, § 70421(a)(4) of the OBBBA amended prior § 1400Z-1(d)(1) to remove
2 Prior § 1400Z-1(d)(2) provided that, notwithstanding the 25-percent limitation, if a State contains fewer than 100 LICs, then a total of 25 tracts that are LICs may be designated.
July 6, 2026 34 Bulletin No. 2026–28
the exception from the 25-percent limitation for Puerto Rico and amended prior § 1400Z-1(d)(1) and (2) to add references to “during any period.” For purposes of applying the 25-percent limitation on the number of population census tracts in a State that may be designated as QOZs by the Secretary, the phrase “during any period” refers to the QOZ designation period under § 1400Z-1(e)(1) beginning on the applicable start date and ending on the day before the date that is 10 years after the applicable start date during which an LIC is designated as a QOZ. Accordingly, the number of previously designated QOZs in a State will not affect the number of population census tracts that a State CEO may nominate to be designated as QOZs for the QOZ designation period beginning January 1, 2027.
(2) Applicable start date and designa- tion period . Under § 1400Z-1(e)(2), the term “applicable start date” means, with respect to any QOZ designated under § 1400Z-1, the January 1 following the date on which such QOZ was certified and designated. Therefore, for every LIC certified and designated by the Secretary as a QOZ under § 1400Z-1(b) during 2026, the QOZ designation period begins on January 1, 2027, and ends on December 31, 2036.
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