Section 1400Z-2 describes the benefits for taxpayers who invest in a QO Zone. To receive the benefits, a taxpayer must invest in a Qualified Opportunity Fund (QO Fund). A QO Fund is any investment vehicle organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property.
To become a QO Fund, the organizer of the fund self-certifies by attaching a form to the federal tax return for the year of creation. Consequently, the fund organizer has the burden to create and maintain the fund within the statutory boundaries. To be eligible for the QO Zone tax benefits, the fund must hold at least 90% of its assets in a qualified opportunity zone property, which includes qualified opportunity zone stock, qualified opportunity zone partnership interests, or qualified opportunity zone tangible business property used in a trade or business.
The 90% asset investment requirement is measured twice per year-on the last day of the first six months of the QO Fund’s taxable year and on the last day of the QO Fund’s taxable year.  If the QO Fund fails to meet the 90% standard, it will pay a penalty for each month it fails the requirement.
As the primary motivation behind the QO Zone policy is economic development and job growth in low-income communities, the QO Zone Fund must hold investments in an active trade or business. That is, whether the Fund invests in stock of a corporation, holds an interest in a partnership, or owns tangible business property, the underlying investment must represent a QO Zone Business (QOZB).
A QOZB is a trade or business in which substantially all of the tangible property owned and leased by the taxpayer is Qualified Opportunity Zone Business Property (QOZBP).  QOZBP means tangible property used in the QOZB.  In addition, at least 50% of the QOZB gross income must be derived from the active conduct of the business.  QOZBs will not include private or commercial golf courses, country clubs, massage parlors, hot tub facilities, suntan facilities, racetracks or other facilities used for gambling, or stores with the principal business purpose to sell alcoholic beverages for consumption off premises. 
Following the Governors’ designations of QO Zones and the creation of QO Funds to invest in the Zones, taxpayers are eligible to receive tax benefits from their investments. The structure of the tax benefits from QO Zone investments is the deferral of gains that can lead to an exclusion of gains as the length of the holding period of the investment increases.
Section 1400Z-2(a)(1) allows a taxpayer to elect to defer recognition of a gain realized in the current year if the gain is invested in a QO Fund within 180 days of the sale or exchange that created the gain. These gains can be deferred until the earlier of the sale of the QO Fund investment or 12/31/26. The statute specifically requires an investment of the gain in a QO Fund; therefore, the taxpayer is not required to invest the basis recovered in the sale or exchange into the QO Fund. In addition, there is no dollar limit on the amount of the gain that can be invested.
Gains deferred under Section 1400Z-2(a)(1) become eligible for exclusion if statutory holding periods are met. If the QO Fund investment is held by the taxpayer for a minimum of five years, 10% of the gain deferred from investing in the QO Fund is added to the basis of the QO Fund investment. The stepped-up basis for 10% of the gain transforms that portion of the gain from a temporary deferral into a permanent exclusion. If the investment holding period is extended to seven years, 15% of the invested gain, or another 5% from the five-year adjustment, is added to the QO Fund basis, creating an exclusion of 15% of the gain invested in the QO Fund.
The stepped-up basis provisions for the five-year and seven-year holding periods address tax benefits related to gains rolled over into a QO Fund. The QO Policy includes an additional benefit tied to the holding period of the QO Fund investment. Taxpayers holding QO Fund investments for at least 10 years may elect to exclude gains realized from the sale or exchange of their QO Fund interests.
While the NTMC restricted eligibility to individual or corporate taxpayers, the QO Fund provisions include a generic reference to “taxpayers,” which implies that any taxpayer, including individuals, corporations, partnerships, estates, or trusts, may take advantage of the QO Fund investment tax benefits. To receive the tax benefits, the taxpayer making the investment in the QO Fund must file an election and acquire an interest in the QO Fund within 180 days of the sale or exchange, thereby allowing the gain to be rolled over into the Fund. While proposed regulations seek to clarify the beginning and ending points for measuring the 180-day period, there is no provision in Section 1400Z-1 and Section 1400Z-2 for extending the 180-day period.
 Section 1400Z-2(d)(1)(A) and (B).
 Section 1400Z-2(f)(1).
 Section 1400Z-2(d)(2)(D)(1).
 Section 1400Z-2(d)(3)(A).
 Section 1400Z-2(d)(3)(A)(ii).
 Section 1400Z-2(d)(3)(A)(iii).
 Section 1400Z-2(b)(2)(B).
 Section 1400Z-(c).
 Section 1.1400Z-(2)(a)(1) and RIA Explanation ¶ 1400Z-24.