Internal Revenue Bulletin 2026-28 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2026–28
July 6, 2026
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
EMPLOYEE PLANS
Notice 2026-38, page 30.
This notice sets forth updates on the corporate bond
monthly yield curve, the corresponding spot segment rates
for May 2026 used under § 417(e)(3)(D), the 24-month
average segment rates applicable for June 2026, and the
30-year Treasury rates, as reflected by the application of
§ 430(h)(2)(C)(iv).
INCOME TAX
Notice 2026-40, page 33.
Notice 2026-40 announces that the Department of the
Treasury (Treasury Department) and the Internal Revenue
Service (IRS) intend to issue proposed regulations regard-
ing qualified opportunity zones (QOZs) under §§ 1400Z-1
and 1400Z-2 of the Internal Revenue Code (Code), as
amended by § 70421 of Public Law 119-21, 139 Stat. 72
(July 4, 2025), commonly known as the One, Big, Beautiful
Bill Act (OBBBA), including transitional guidance related to
qualifying investments under §§ 1400Z-1 and 1400Z-2, as
in effect prior to amendment by § 70421 of the OBBBA
(forthcoming proposed regulations). The forthcoming pro-
posed regulations are anticipated to include proposed rules
similar to the rules provided in sections 3 through 5 of this
notice.
Rev. Rul. 2026-12, page 27.
Federal rates; adjusted federal rates; adjusted federal long-
term rate, and the long-term tax exempt rate. For purposes
of sections 382, 1274, 1288, 7872 and other sections of
the Code, tables set forth the rates for July 2026.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
July 6, 2026 Bulletin No. 2026–28

Part II
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7702, 7872.)
Rev. Rul. 2026-12
This revenue ruling provides vari-
ous prescribed rates for federal income
tax purposes for July 2026 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Internal
Revenue Code. Table 2 contains the short-
term, mid-term, and long-term adjusted
applicable federal rates (adjusted AFR) for
the current month for purposes of section
1288(b). Table 3 sets forth the adjusted
federal long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropriate
percentages for determining the low-in-
come housing credit described in section
42(b)(1) for buildings placed in service
during the current month. However, under
section 42(b)(2), the applicable percent-
age for non-federally subsidized new
buildings placed in service after July 30,
2008, shall not be less than 9%. Table 5
contains the federal rate for determining
the present value of an annuity, an interest
for life or for a term of years, or a remain-
der or a reversionary interest for purposes
of section 7520. Finally, Table 6 contains
the blended annual rate for 2026 for pur-
poses of section 7872.
REV. RUL. 2026-12 TABLE 1
Applicable Federal Rates (AFR) for July 2026
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR4.00%3.96%3.94%3.93%
110% AFR4.41%4.36%4.34%4.32%
120% AFR4.81%4.75%4.72%4.70%
130% AFR5.22%5.15%5.12%5.10%
Mid-term
AFR4.35%4.30%4.28%4.26%
110% AFR 4.79%4.73%4.70%4.68%
120% AFR5.23%5.16%5.13%5.11%
130% AFR5.67%5.59%5.55%5.53%
150% AFR6.55%6.45%6.40%6.36%
175% AFR7.67%7.53%7.46%7.41%
Long-term
AFR4.98%4.92%4.89%4.87%
110% AFR5.48%5.41%5.37%5.35%
120% AFR5.99%5.90%5.86%5.83%
130% AFR6.50%6.40%6.35%6.32%
REV. RUL. 2026-12 TABLE 2
Adjusted AFR for July 2026
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted AFR3.03%3.01%3.00%2.99%
Mid-term adjusted AFR3.29%3.26%3.25%3.24%
Long-term adjusted AFR3.77%3.74%3.72%3.71%
Bulletin No. 2026–28 27 July 6, 2026

REV. RUL. 2026-12 TABLE 3
Rates Under Section 382 for July 2026
Adjusted federal long-term rate for the current month3.77%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal
long-term rates for the current month and the prior two months.)
3.77%
REV. RUL. 2026-12 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for July 2026
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after
July 30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit8.09%
Appropriate percentage for the 30% present value low-income housing credit 3.47%
REV. RUL. 2026-12 TABLE 5
Rate Under Section 7520 for July 2026
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest
5.20%
REV. RUL. 2026-12 TABLE 6
Blended Annual Rate for 2026
Section 7872(e)(2) blended annual rate for 20263.82%

Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2026. See Rev. Rul. 2026-12, page 27.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2026. See Rev. Rul. 2026-12, page 27.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of July 2026. See Rev.
Rul. 2026-12, page 27.
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2026. See Rev. Rul. 2026-12, page 27.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of July 2026. See Rev. Rul.
2026-12, page 27.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2026. See Rev. Rul. 2026-12, page 27.
Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2026. See Rev. Rul. 2026-12, page 27.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
July 2026. See Rev. Rul. 2026-12, page 27.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of July 2026. See Rev. Rul.
2026-12, page 27.
July 6, 2026 28 Bulletin No. 2026–28

Bulletin No. 2026–28 29 July 6, 2026
Section 7872.—Treatment
of Loans With Below-
Market Interest Rates
The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of July
2026. See Rev. Rul. 2026-12, page 27.

July 6, 2026 30 Bulletin No. 2026–28
Part III
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2026-38
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month aver-
age segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the inter-
est rate on 30-year Treasury securities
under § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008 and the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to sin-
gle-employer plans (except for CSEC plans
under § 414(y)) pursuant to § 412. Section
430(h)(2) specifies the interest rates that
must be used to determine a plan’s target
normal cost and funding target. Under
this provision, present value is generally
determined using three 24-month average
interest rates (“segment rates”), each of
which applies to cash flows during speci-
fied periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates
are adjusted by the applicable percentage
of the 25-year average segment rates for
the period ending September 30 of the
year preceding the calendar year in which
the plan year begins.
1
However, an elec-
tion may be made under § 430(h)(2)(D)
(ii) to use the monthly yield curve in place
of the segment rates.
Section 1.430(h)(2)-1(d) provides
rules for determining the monthly cor-
porate bond yield curve, and § 1.430(h)
(2)-1(c) provides rules for determining
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Con-
sistent with the methodology specified in
§ 1.430(h)(2)-1(d), the monthly corporate
bond yield curve derived from May 2026
data is in Table 2026-5 at the end of this
notice. The spot first, second, and third
segment rates for the month of May 2026
are, respectively, 4.42, 5.47, and 6.31.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percent-
ages of the corresponding 25-year aver-
age segment rates. Those percentages are
95% and 105% for plan years beginning
in 2025 and 2026. For this purpose, any
25-year average segment rate that is less
than 5% is deemed to be 5%. The 25-year
average segment rates for plan years
beginning in 2025 and 2026 were pub-
lished in Notice 2024-67, 2024-41 I.R.B.
726 and Notice 2025-47, 2025-40 I.R.B.
441, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for June
2026 without adjustment for the 25-year
average segment rate limits are as follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
Applicable Month First Segment Second Segment Third Segment
June 2026 4.39 5.26 5.90
The adjusted 24-month average seg-
ment rates set forth in the chart below
reflect § 430(h)(2)(C)(iv) of the Code. The
24-month averages applicable for June
2026, adjusted to be within the applicable
minimum and maximum percentages of
the corresponding 25-year average seg-
ment rates in accordance with § 430(h)(2)
(C)(iv), are as follows:
Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning InApplicable MonthFirst SegmentSecond SegmentThird Segment
2025June 20264.755.265.90
2026June 20264.755.255.90
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation
described in § 431(c)(6)(A), based on the
plan’s current liability. Section 431(c)
(6)(E)(ii)(I) provides that the interest
rate used to calculate current liability for
this purpose must be no more than 5 per-
cent above and no more than 10 percent
below the weighted average of the rates
1
Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).

Bulletin No. 2026–28 31 July 6, 2026
of interest on 30-year Treasury securi-
ties during the four-year period ending
on the last day before the beginning of
the plan year. Notice 88-73, 1988-2 C.B.
383, provides guidelines for determin-
ing the weighted average interest rate.
The rate of interest on 30-year Treasury
securities for May 2026 is 5.03 percent.
The Service determined this rate as the
average of the daily determinations
of yield on the 30-year Treasury bond
maturing in February 2056 determined
each day through May 12, 2026 and
the yield on the 30-year Treasury bond
maturing in May 2056 determined each
day for the balance of the month. For
plan years beginning in June 2026, the
weighted average of the rates of interest
on 30-year Treasury securities and the
permissible range of rates used to calcu-
late current liability are as follows:
Treasury Weighted Average Rates
For Plan Years Beginning In30-Year Treasury Weighted AveragePermissible Range 90% to 105%
June 20264.534.08 to 4.76
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Section 1.417(e)-1(d)(3) pro-
vides guidelines for determining the min-
imum present value segment rates. Pursu-
ant to that section, the minimum present
value segment rates determined for May
2026 are as follows:
Minimum Present Value Segment Rates
Month First Segment Second Segment Third Segment
May 2026 4.42 5.47 6.31
DRAFTING INFORMATION
The principal author of this notice
is Tom Morgan of the Office of Associ-
ate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Tony Montanaro at
626-927-1475 (not toll-free number).

July 6, 2026 32 Bulletin No. 2026–28
Table 2026-5
Monthly Yield Curve for May 2026
Derived from May 2026 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.53.9920.55.9840.56.3460.56.4780.56.53
1.04.1421.05.9941.06.3561.06.4781.06.53
1.54.2821.56.0141.56.3561.56.4781.56.53
2.04.3822.06.0342.06.3662.06.4782.06.53
2.54.4522.56.0442.56.3662.56.4782.56.53
3.04.5023.06.0643.06.3763.06.4883.06.53
3.54.5423.56.0743.56.3763.56.4883.56.53
4.04.5824.06.0944.06.3764.06.4884.06.53
4.54.6224.56.1044.56.3864.56.4884.56.53
5.04.6725.06.1145.06.3865.06.4885.06.54
5.54.7225.56.1345.56.3865.56.4885.56.54
6.04.7826.06.1446.06.3966.06.4986.06.54
6.54.8426.56.1546.56.3966.56.4986.56.54
7.04.9127.06.1647.06.4067.06.4987.06.54
7.54.9727.56.1747.56.4067.56.4987.56.54
8.05.0428.06.1848.06.4068.06.4988.06.54
8.55.1028.56.1948.56.4168.56.4988.56.54
9.05.1629.06.2049.06.4169.06.5089.06.54
9.55.2229.56.2149.56.4169.56.5089.56.54
10.05.2830.06.2250.06.4170.06.5090.06.55
10.55.3430.56.2350.56.4270.56.5090.56.55
11.05.3931.06.2351.06.4271.06.5091.06.55
11.55.4431.56.2451.56.4271.56.5091.56.55
12.05.4932.06.2552.06.4372.06.5092.06.55
12.55.5332.56.2652.56.4372.56.5192.56.55
13.05.5733.06.2653.06.4373.06.5193.06.55
13.55.6133.56.2753.56.4373.56.5193.56.55
14.05.6534.06.2854.06.4474.06.5194.06.55
14.55.6834.56.2854.56.4474.56.5194.56.55
15.05.7235.06.2955.06.4475.06.5195.06.55
15.55.7535.56.2955.56.4475.56.5195.56.56
16.05.7836.06.3056.06.4576.06.5296.06.56
16.55.8036.56.3056.56.4576.56.5296.56.56
17.05.8337.06.3157.06.4577.06.5297.06.56
17.55.8537.56.3257.56.4577.56.5297.56.56
18.05.8838.06.3258.06.4578.06.5298.06.56
18.55.9038.56.3358.56.4678.56.5298.56.56
19.05.9239.06.3359.06.4679.06.5299.06.56
19.55.9439.56.3459.56.4679.56.5299.56.56
20.05.9640.06.3460.06.4680.06.53100.06.56

Bulletin No. 2026–28 33 July 6, 2026
Transitional Guidance
on Qualified Opportunity
Zones under §§ 1400Z-1
and 1400Z-2
Notice 2026-40
SECTION 1. PURPOSE
This notice announces that the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) intend to issue proposed regulations
regarding qualified opportunity zones
(QOZs) under §§ 1400Z-1 and 1400Z-2
of the Internal Revenue Code (Code)
1
,
as amended by § 70421 of Public Law
119-21, 139 Stat. 72 (July 4, 2025), com-
monly known as the One, Big, Beautiful
Bill Act (OBBBA), including transitional
guidance related to qualifying invest-
ments under §§ 1400Z-1 and 1400Z-2, as
in effect prior to amendment by § 70421
of the OBBBA (forthcoming proposed
regulations). The forthcoming proposed
regulations are anticipated to include pro-
posed rules similar to the rules provided in
sections 3 through 5 of this notice.
SECTION 2. BACKGROUND
.01 Sections 1400Z-1 and 1400Z-2
(1) Section 1400Z-1. Section 1400Z-1
provides the procedural rules for the des-
ignation of QOZs, the related definitions,
and the applicable period for which such
designations remain in effect.
(2) Section 1400Z-2. Section 1400Z-2
allows the deferral of inclusion in gross
income for certain realized gains to the
extent that corresponding amounts are
timely invested in a corporation or part-
nership that meets the requirements to be
certified as a qualified opportunity fund
(QOF), as defined in § 1400Z-2(d)(1) and
§ 1.1400Z2(d)-1. If certain qualifications
and holding period requirements are met,
then (i) a portion of such deferred gains
may be excluded from gross income, and
(ii) gain on the taxpayer’s investment of
such amounts in a QOF may be exclud-
able from gross income.
.02 References to §§ 1400Z-1 and
1400Z-2. All references hereinafter in this
notice to “prior § 1400Z-1” and “prior
§ 1400Z-2” refer to §§ 1400Z-1 and
1400Z-2, as in effect after amendment of
the Code by both § 13823 of Public Law
115-97, 131 Stat. 2054, 2183 (December
22, 2017), commonly known as the Tax
Cuts and Jobs Act (TCJA), and by § 41115
of the Bipartisan Budget Act of 2018
(BBA 2018), Public Law 115-123, 132
Stat. 64, 161 (February 9, 2018), but prior
to amendment by § 70421 of the OBBBA.
All references in this notice to Ҥ 1400Z-
1” and “§ 1400Z-2” refer to §§ 1400Z-1
and 1400Z-2 as amended by § 70421 of
the OBBBA.
.03 Definitions
(1) Qualified Opportunity Zones. For
purposes of §§ 1400Z-1 and 1400Z-2,
§ 1400Z-1(a) defines a QOZ as any pop-
ulation census tract that is a low-income
community (LIC), as defined in § 1400Z-
1(c)(1), that is designated as a QOZ. This
notice refers to a QOZ designated under
prior § 1400Z-1 as a “previously desig-
nated QOZ.”
(2) Qualified Opportunity Fund. Sec-
tion 1400Z-2(d)(1) provides that a QOF
is an investment vehicle that is organized
as a corporation or a partnership for the
purpose of investing in qualified oppor-
tunity zone property (QOZP), other than
another QOF, that holds at least 90 percent
of its assets in QOZP as measured on the
dates described in § 1400Z-2(d)(1)(A) and
(B) (90-percent investment standard). See
§ 1.1400Z2(a)-1(b)(4).
(3) Qualified opportunity zone prop-
erty. Section 1400Z-2(d)(2)(A) defines
QOZP as property that is qualified
opportunity zone stock (QOZ stock),
qualified opportunity zone partnership
interest (QOZ partnership interest), or
qualified opportunity zone business prop-
erty (QOZBP).
(a) Qualified opportunity zone stock.
Effective for stock acquired on or before
December 31, 2026, prior § 1400Z-2(d)(2)
(B) and the regulations thereunder define
QOZ stock as any stock in a domestic cor-
poration if: (i) the stock was acquired by
a QOF at its original issue from the cor-
poration solely in exchange for cash after
December 31, 2017; (ii) the corporation
was a qualified opportunity zone business
(QOZB) (or newly organized for such pur-
pose) at the time the stock was issued; and
(iii) for 90 percent of the QOF’s holding
period of such stock, the corporation qual-
ified as a QOZB. See prior §§ 1400Z-2(d)
(2)(B) and 1.1400Z2(d)-1(c)(2)(i). Effec-
tive for stock acquired after December 31,
2026, § 70421(c)(4)(B) of the OBBBA
modified § 1400Z-2(d)(2)(B)(i)(I) by
replacing “December 31, 2017,” with
“applicable date,” which, as defined in
§ 1400Z-2(d)(2)(E), means, with respect
to any corporation that is a QOZB, the
earliest applicable start date with respect
to the QOZBP held by such QOZB. See
paragraph (5) of this subsection for the
definition of “applicable start date.”
(b) Qualified opportunity zone part-
nership interest. Effective for partnership
interests acquired on or before Decem-
ber 31, 2026, prior § 1400Z-2(d)(2)(C)
and the regulations thereunder define
QOZ partnership interest as any capital
or profits interest in a domestic partner-
ship where: (i) the interest was acquired
by a QOF from the partnership solely in
exchange for cash after December 31,
2017; (ii) the partnership was a QOZB
(or newly formed for such purpose) at the
time the interest was acquired; and (iii) for
90 percent of the QOF’s holding period of
such interest, the partnership qualified as
a QOZB. See prior § 1400Z-2(d)(2)(C)
and § 1.1400Z2(d)-1(c)(3)(i). Effective
for partnership interests acquired after
December 31, 2026, § 70421(c)(4)(B)
of the OBBBA modified § 1400Z-2(d)
(2)(C)(i) by replacing “December 31,
2017,” with “applicable date” as defined
in § 1400Z-2(d)(2)(E). Under § 1400Z-
2(d)(2)(E), “applicable date” means,
with respect to any partnership that is a
QOZB, the earliest applicable start date
with respect to the QOZBP held by such
QOZB.
(c) Qualified opportunity zone business
property. Effective for property acquired
on or before December 31, 2026, prior
§ 1400Z-2(d)(2)(D) defines QOZBP as
tangible property used in a trade or busi-
ness of the QOF if (i) such property was
acquired by the QOF by purchase after
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

July 6, 2026 34 Bulletin No. 2026–28
December 31, 2017, (ii) the original use
of such property in the QOZ commences
with the QOF or the QOF substantially
improves the property, and (iii) during
substantially all of the QOF’s holding
period for such property, substantially
all of the use of such property was in a
QOZ. Effective for property acquired after
December 31, 2026, § 70421(c)(4)(A)
of the OBBBA amended prior § 1400Z-
2(d)(2)(D)(i)(I) by striking “December
31, 2017” at the end of the subclause and
inserting “the applicable start date (as
defined in § 1400Z-1(e)(2)) with respect
to the [QOZ] described in” § 1400Z-2(d)
(2)(D)(i)(III).
(4) Qualified opportunity zone busi-
ness.
(a) In general. Section 1400Z-2(d)(3)
(A) defines a QOZB as a trade or business
in which substantially all of the tangible
property owned or leased in connection
with the trade or business is QOZBP.
The trade or business must also satisfy
the following requirements provided in
§ 1397C(b)(2), (4), and (8): (i) at least 50
percent of the total gross income of the
entity must be derived from the active
conduct of a trade or business in the QOZ;
(ii) a substantial portion of the intangible
property of such entity must be used in the
active conduct of a trade or business in the
QOZ; and (iii) less than five percent of the
average of the aggregate unadjusted bases
of the entity’s property must be attribut-
able to nonqualified financial property.
Finally, a QOZB may not be a trade or
business described in § 144(c)(6)(B). See
also § 1.1400Z2(d)-1(d)(3).
(b) 70-percent tangible property stan-
dard. Section 1.1400Z2(d)-1(d)(1)(i)
and (d)(2) clarify the “substantially all”
requirement provided in § 1400Z-2(d)(3)
(A)(i) regarding the amount of tangible
property owned or leased by the taxpayer
that is required to be QOZBP. Under the
regulations, for an entity’s trade or busi-
ness to satisfy the “substantially all”
requirement, at least 70 percent (by value)
of the tangible property owned or leased
by the trade or business must be QOZBP.
(5) Applicable start date and effec-
tive period. Section 70421(b)(2) of the
OBBBA redesignated prior § 1400Z-1(f)
as § 1400Z-1(e), and § 70421(b)(3) of
the OBBBA modified when a QOZ des-
ignation period begins and ends for QOZs
designated under § 1400Z-1. A QOZ des-
ignation period under § 1400Z-1(e)(1)
begins on the applicable start date and
ends on the day before the date that is 10
years after the applicable start date. 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. These provi-
sions are effective only for areas certified
and designated after the enactment of the
OBBBA.
.04 Designations of QOZs.
(1) In General. Section 1400Z-1(b)
(1) allows the Chief Executive Offi-
cer (CEO) of each State, territory of the
United States, and the District of Colum-
bia (State) to nominate LICs within their
jurisdiction to be certified and designated
by the Secretary of the Treasury or Sec-
retary’s delegate (Secretary) as QOZs. As
described in section 3.01(1) of this notice,
§ 1400Z-1(d) limits the number of popula-
tion census tracts in a State that the Secre-
tary may designate as QOZs with respect
to any designation period. See Rev. Proc.
2026-14, 2026-20 I.R.B. 910, for guidance
for State CEOs regarding nomination of a
population census tract for designation as
a QOZ effective on January 1, 2027.
(2) Designations of previously desig-
nated QOZs.
(a) In general. Under prior § 1400Z-
1(c)(1), a population census tract was eli-
gible for designation as a QOZ if it satis-
fied the definition of an LIC in § 45D(e).
In addition, prior § 1400Z-1(e) provided
that a population census tract that was not
an LIC could be designated as a QOZ if,
among other requirements, the tract was
contiguous with an LIC that was des-
ignated as a QOZ. Rev. Proc. 2018-16,
2018-9 I.R.B. 383, provided guidance on
the nomination, certification, and designa-
tion process under prior § 1400Z-1(b)(1)
and (2). After the enactment of the TCJA,
§ 41115 of BBA 2018 created a spe-
cial rule for Puerto Rico by adding prior
§ 1400Z-1(b)(3), under which all LICs in
Puerto Rico were deemed certified and
designated as QOZs effective on the date
of the enactment of the TCJA (that is,
December 22, 2017).
(b) Notices 2018-48 and 2019-42.
Notice 2018-48, 2018-28 I.R.B. 9, ampli-
fied by Notice 2019-42, 2019-29 I.R.B.
352, provides a list of LICs certified and
designated as QOZs by the Secretary
in 2018, as well as LICs in Puerto Rico
deemed certified and designated as QOZs
under prior § 1400Z-1(b)(3), effective
on December 22, 2017. Notice 2019-42,
2019-29 I.R.B. 352, added two additional
census tracts in Puerto Rico that were
deemed certified and designated as QOZs
under prior § 1400Z-1(b)(3) effective on
December 22, 2017.
(c) Period for which designation is
in effect. Prior § 1400Z-1(f) provided a
10-year “QOZ designation period” for
which a population census tract, once des-
ignated as a QOZ, would remain desig-
nated, beginning on the date of the desig-
nation and ending at the close of the 10th
calendar year beginning on or after such
date of designation. Accordingly, the QOZ
designation period under prior § 1400Z-
1(f) ends on—
(i) December 31, 2027, for QOZs
deemed certified and designated in Puerto
Rico under prior § 1400Z-1(b)(3), and
(ii) December 31, 2028, for all other
QOZs.
SECTION 3. TRANSITIONAL
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 desig-
nated 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 des-
ignations made during any period. Spe-
cifically, § 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.

Bulletin No. 2026–28 35 July 6, 2026
the exception from the 25-percent limita-
tion 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. Accord-
ingly, the number of previously desig-
nated 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 cer-
tified 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.
SECTION 4. TRANSITIONAL
GUIDANCE FOR INVESTORS
.01 Gain realized on or before Decem-
ber 31, 2026, and invested in a QOF on or
before December 31, 2026.
(1) In general. Under § 1400Z-2(a)(1)
(A) and § 1.1400Z2(a)-1, in the case of a
taxpayer with one or more eligible gains,
as defined in § 1.1400Z2(a)-1(b)(11), at
the election of the taxpayer, gross income
for the taxable year will not include the
aggregate amount of such gain invested
by the taxpayer in a QOF during the 180-
day period beginning on the date of the
events that gave rise to that gain. Prior
§ 1400Z-2(b)(1)(B) and § 1.1400Z2(b)-
1(b) provide that if gain was deferred by
reason of an election under § 1400Z-2(a)
for a timely qualifying investment made
on or before December 31, 2026, then
such gain must be included in the tax-
payer’s gross income in the taxable year
that includes the earlier of (i) the date on
which an inclusion event, as defined in
§ 1.1400Z2(b)-1(c), occurs with respect
to such qualifying investment (or portion
thereof), or (ii) December 31, 2026.
(2) Inability to make a deferral election
for taxpayers holding qualifying invest-
ments through December 31, 2026. Tax-
payers holding a qualifying investment
(or portion thereof) through December 31,
2026, are required to include in income in
the taxable year that includes that date the
amount of remaining deferred gain from the
qualifying investment as calculated under
prior § 1400Z-2(b)(2) and § 1.1400Z2(b)-
1(e)(3) (deemed included gain). Taxpay-
ers that recognize deemed included gain
on December 31, 2026, continue to hold a
qualifying investment for which an elec-
tion under § 1400Z-2(a) remains in effect.
See § 1400Z-2(e)(1)(A), §§ 1.1400Z2(a)-
1(b)(34) and 1.1400Z2(c)-1(b)(1)(i).
Amounts of deemed included gain may
not be deferred pursuant to either prior or
current § 1400Z-2(a)(1)(A) because, as
noted above, an election continues to be
in effect under prior and current § 1400Z-
2(a)(2) with respect to the eligible gain
that gave rise to the deemed included gain
on December 31, 2026. Thus, no amount
of deemed included gain can be eligible
gain with respect to which an election
under either prior or current § 1400Z-2(a)
may be made.
(3) Continued eligibility to make an
election under § 1400Z-2(c). Because the
election under § 1400Z-2(a) with respect
to a qualifying investment continues in
effect when an eligible taxpayer recog-
nizes deemed included gain in the tax-
able year which includes December 31,
2026, under prior § 1400Z-2(b)(1)(B)
and § 1.1400Z2(b)-1(b)(2), the taxpayer
remains potentially eligible to make an
election under § 1400Z-2(c) on the later
sale or exchange of that qualifying invest-
ment. (The election under § 1400Z-2(c)
can be made only if the taxpayer satisfies
the 10-year holding period requirement
and the other requirements of § 1400Z-2
and the regulations thereunder through the
date on which the investment is disposed
of. See § 1.1400Z2(c)-1(b)(1)(i).)
.02 Gain realized on or before Decem-
ber 31, 2026, and invested in a QOF on or
after January 1, 2027.
(1) In general. Section 70421(c)(1) of
the OBBBA modified prior § 1400Z-2(a)
(2) by allowing a deferral election to be
made after December 31, 2026. In addi-
tion, § 70421(c)(2) of the OBBBA modi-
fied prior § 1400Z-2(b) in multiple ways,
including by changing the taxable year of
inclusion in prior § 1400Z-2(b)(1)(B) from
that which includes December 31, 2026,
to that which includes the date that is 5
years after the date the qualifying invest-
ment was made. Under § 1400Z-2(b)(2)
(B), if a qualifying investment is held for
at least five years, a taxpayer’s basis in
the qualifying investment increases by 10
percent (or 30 percent, in the case of any
investment in a qualified rural opportunity
fund, as defined in § 1400Z-2(b)(2)(C)).
Section 1400Z-2(b)(2)(B) and (C) are
effective for amounts invested in QOFs
after December 31, 2026. See § 70421(c)
(5)(A) of the OBBBA.
(2) Gain eligible for deferral. In the
case of a taxpayer with eligible gain real-
ized on, before, or after December 31,
2026, who timely invests a correspond-
ing amount in a QOF on or after January
1, 2027, the taxpayer may elect to defer
the recognition of that gain provided the
requirements under § 1400Z-2(a) are met.
See § 1.1400Z2(a)-1(b)(7) for guidance on
what is considered a timely investment.
The deferred gain with respect to a quali-
fying investment made on or after January
1, 2027, must be included in gross income
in the taxable year that includes the earli-
est of (i) the date on which such qualifying
investment (or portion thereof) is sold or
exchanged, (ii) the date on which an inclu-
sion event other than a sale or exchange
occurs with respect to such qualifying
investment (or portion thereof), or (iii)
five years from the date the qualifying
investment was made. Section 1400Z-
2(b)(2)(B) provides for the determination
of basis for purposes of determining the
amount of gain included in gross income.
.03 Eligibility of inclusion event gain.
(1) In general. Under § 1.1400Z2(a)-
1(b)(11)(iv)(A), gain with respect to a
qualifying investment (or portion thereof)
that is otherwise required to be included in
gross income due to the occurrence of an
inclusion event (inclusion event gain) may
be eligible for deferral under § 1400Z-2(a)
(1), provided that all of the requirements to
elect to defer eligible gain under § 1400Z-
2(a)(1)(A) are met. For purposes of deter-
mining whether inclusion event gain is

July 6, 2026 36 Bulletin No. 2026–28
eligible gain under § 1400Z-2(a)(1)(A),
such inclusion event gain is treated as if it
were realized upon the occurrence of the
inclusion event rather than on the sale or
exchange that gave rise to the eligible gain
to which the inclusion event relates. See
§ 1.1400Z2(a)-1(b)(11)(iv).
(2) Requirements to defer inclusion
event gain under § 1400Z-2(a). Inclu-
sion event gain may be deferred by mak-
ing a qualifying investment within 180
days of the inclusion event date. See
§ 1.1400Z2(a)-1(b)(11)(iv)(B). To the
extent a taxpayer has an inclusion event
with respect to any portion of a qualify-
ing investment, that portion is no longer
a qualifying investment and the taxpayer
is not eligible to make an election pursu-
ant to § 1400Z-2(c) with respect to that
portion of the qualifying investment. For
guidance on the treatment of the portion
of a qualifying investment to which an
inclusion event relates and the inability to
make an election under § 1400Z-2(c) with
respect to that portion of the investment,
see § 1.1400Z2(c)-1(b)(1)(i).
SECTION 5. TRANSITIONAL
GUIDANCE FOR QOFS AND QOZBS
.01 Tangible property acquired after
December 31, 2026.
(1) In general. In order for tangible
property to meet the “acquired by pur-
chase” requirement under § 1400Z-2(d)
(2)(D)(i)(I), such property must be pur-
chased, as defined in § 179(d)(2), after
the applicable start date, as defined in
§ 1400Z-1(e)(2), with respect to the QOZ
(that is, January 1 following the date on
which such QOZ was certified and desig-
nated as a QOZ). The amendment to the
language in prior § 1400Z-2(d)(2)(D)(i)
(I) by § 70421(c)(4)(A) of the OBBBA,
from property acquired by purchase after
“December 31, 2017” to property acquired
by purchase after the “applicable start
date,” applies to any property acquired
after December 31, 2026. See § 70421(c)
(5)(B) of the OBBBA. Thus, § 1400Z-1(e)
(2)’s definition of “applicable start date” is
effective only for a QOZ designated after
the date of enactment of the OBBBA. See
§ 70421(b)(4) of the OBBBA. A previ-
ously designated QOZ does not have an
“applicable start date” under § 1400Z-
1(e)(2) because its designation took place
before the date of enactment of OBBBA.
Therefore, property acquired by a QOF
or QOZB after December 31, 2026, can-
not be QOZBP unless (i) the property is
acquired for use in a QOZ that is desig-
nated after July 4, 2025, or (ii) one of the
exceptions in section 5.01(2) and (3) of
this notice applies.
(2) Property acquired pursuant to a
working capital safe harbor plan after
December 31, 2026.
(a) In general. Section 1400Z-2(d)
(3)(A)(ii) incorporates § 1397C(b)(8),
which requires that less than 5 percent
of the average of the aggregate unad-
justed bases of the property of the rele-
vant entity be attributable to nonqualified
financial property in each taxable year. In
general, under § 1397C(e), “nonqualified
financial property” means debt, stock,
partnership interests, options, futures
contracts, forward contracts, warrants,
notional principal contracts, annuities,
and other similar property specified in
regulations. However, under § 1397C(e)
(1), this term does not include reasonable
amounts of working capital held in cash,
cash equivalents, or debt instruments with
a term of 18 months or less. For purposes
of applying § 1397C(e)(1) to a QOZB
under § 1400Z-2(d)(3), § 1.1400Z2(d)-
1(d)(3)(v) provides a safe harbor under
which working capital assets are treated
as reasonable in amount if the following
requirements, provided in § 1.1400Z2(d)-
1(d)(3)(v)(A) through (C), are satisfied.
First, the working capital assets must be
designated in writing for the development
of a trade or business in a QOZ, includ-
ing when appropriate the acquisition, con-
struction, and/or substantial improvement
of tangible property in the QOZ. Second,
there must be a written schedule consis-
tent with the ordinary start-up of a trade
or business for expenditure of those work-
ing capital assets. Under the schedule,
the working capital assets must be spent
within 31 months of the receipt by the
business of the assets. Third, the working
capital assets must be used in a manner
that is substantially consistent with the
writing and the written schedule. A single
business may benefit from more than a
single application of the working capital
safe harbor, provided that each application
independently satisfies all of the require-
ments of § 1.1400Z2(d)-1(d)(3)(v)(A)
through (C). See § 1.1400Z2(d)-1(d)(3)(v)
(E). Additionally, pursuant to a working
capital safe harbor for start-up businesses
that are not yet operating as a trade or
business, these entities may treat certain
amounts as satisfying the requirements for
QOZB qualification under § 1400Z-2(d)
(3)(i) for the duration of the working capi-
tal safe harbor. See § 1.1400Z2(d)-1(d)(3)
(vi).
(b) Transition guidance regarding
QOZBP. If an entity acquires property
after December 31, 2026, for use in a pre-
viously designated QOZ and pursuant to
a written plan meeting the requirements
of the § 1.1400Z2(d)-1(d)(3)(v) and (vi)
working capital safe harbors, then that
property may satisfy the acquisition
requirement of § 1400Z-2(d)(2)(D)(i)(I) if
(i) the working capital plan was adopted
on or before December 31, 2026, (ii) the
relevant property acquisitions are made in
a manner substantially consistent with that
plan, (iii) the QOZB has received at least
ten percent of the total estimated working
capital assets designated in writing pursu-
ant to the plan by December 31, 2026, and
(iv) the QOZB expends at least five per-
cent of the total estimated working capital
assets by December 31, 2026. Amounts
required to be expended by a QOZB pur-
suant to a binding agreement entered into
prior to January 1, 2027, will be consid-
ered to be expended for purposes of the
requirement to expend five percent of the
total estimated working capital assets by
December 31, 2026.
(c) Transition guidance regarding
QOZP. Stock or partnership interests
acquired after December 31, 2026, pur-
suant to a written plan described in this
section 5.01(2), are treated as acquired
after the “applicable date” for purposes
of § 1400Z-2(d)(2)(B)(i)(I) and § 1400Z-
2(d)(2)(C)(i).
(3) Tangible property acquired in the
ordinary course of business after Decem-
ber 31, 2026, for use in a previously des-
ignated QOZ. Tangible property acquired
after December 31, 2026, by a QOF or
QOZB for use in the ordinary course of its
trade or business in a previously designated
QOZ to replace existing tangible business
property may be treated as QOZBP if the
requirements of § 1400Z-2(d)(2)(D) are
otherwise met. Replacements in the ordi-
nary course of a trade or business include

Bulletin No. 2026–28 37 July 6, 2026
the replacement or modernization of prop-
erty necessary to continue the operations
of the trade or business. Replacements in
the ordinary course of a trade or business
do not include tangible property acquired
pursuant to the expansion of a trade or
business or the transition of a trade or
business into a new trade or business.
(4) Examples. The following exam-
ples illustrate the application of the pro-
visions in section 5.01(1) through (3) of
this notice.
(i) Example 1—Tangible property acquired pur-
suant to the expansion of a trade or business. QOZB
A owns and operates an industrial manufacturing
facility in Tract A, which was designated as a QOZ
in 2018 under prior § 1400Z-1. On June 15, 2028,
QOZB A purchases a new warehouse on an adjacent
plot of land from an unrelated third party to expand
the facility’s capacity to produce a new product.
The new warehouse acquired by QOZB A on that
date is not located in a tract that was designated as
a QOZ effective January 1, 2027. Because the new
warehouse was not acquired after the applicable start
date of a tract designated as a QOZ on January 1,
2027, it is not QOZBP under the general rule in sec-
tion 5.01(1) of this notice. Because the new ware-
house was not developed pursuant to a written plan
within the scope of section 5.01(2) of this notice and
was acquired pursuant to the expansion of QOZB
A’s trade or business within the meaning of section
5.01(3) of this notice, it cannot qualify as QOZBP.
(ii) Example 2—Replacement of existing tangible
business property in the ordinary course of the trade
or business. QOZB A owns and operates an apart-
ment building that is QOZBP in Tract B, which was
designated as a QOZ in 2018 under prior § 1400Z-1.
The apartment building is not located in a tract that
was designated as a QOZ effective January 1, 2027.
In 2028 and in 2029, the apartment building requires
window replacements and the purchase of replace-
ment appliances, fixtures, cabinetry, flooring, and
similar tangible property pursuant to the renovation
of apartment units when tenants vacate the premises.
These acquisitions are necessary for the continued
operation of the apartment building and are replace-
ments in the ordinary course of business that qualify
as QOZBP under § 1400Z-2(d)(2)(D). See section
5.01(3) of this notice.
(iii) Example 3—Modernization of property
necessary to continue the operations of the trade or
business. QOZB C operates a trade or business as
a restaurant in Tract D, which was designated as a
QOZ in 2018 under prior § 1400Z-1. The restaurant
is not located in a tract that was designated as a QOZ
effective January 1, 2027. In 2028, in order to main-
tain operations and embrace industry advancements,
the restaurant renovates and modernizes its kitchen,
including adding a new ventilation system to its
kitchen to improve energy efficiency and replacing
its point-of-sale system for a system with tools tai-
lored specifically for the restaurant. The renovation
and modernization of the kitchen are necessary for
the continued operation of the restaurant in an effi-
cient manner and are replacements in the ordinary
course of business that qualify as QOZBP under
§ 1400Z-2(d)(2)(D). See section 5.01(3) of this
notice.
(iv) Example 4–Property acquired pursuant to
a working capital safe harbor plan adopted prior
to December 31, 2026. QOF A forms domestic C
corporation B (QOZB B) to develop a large mixed-
use real estate development that will consist of
commercial and residential real property. QOZB B
has a master written plan for the completion of the
commercial and residential developments over a
55-month period that is estimated to cost $50 million
with $30 million allocated to the initial commercial
development phase and $20 million allocated to
the subsequent residential development phase. The
plan provides that the commercial development will
be completed over a 30-month schedule, ending on
November 30, 2026, and subsequently, the residen-
tial development will be completed over a 25-month
schedule, estimated to be completed by December
31, 2028. The plan further provides that a portion of
the commercial development is unable to be used in
a trade or business after the completion of the com-
mercial development since that portion of the com-
mercial development will be unusable during the res-
idential construction phase. On May 1, 2024, QOF A
acquires stock of QOZB B in exchange for cash of
$30 million. QOZB B expends the full $30 million in
completing the commercial development by Decem-
ber 2026. Pursuant to QOZB B’s original master
plan for the completion of the real estate develop-
ment, QOF A acquires additional stock in QOZB B
for cash in December 2026, and QOZB B begins to
use the cash for the residential development phase in
early 2027. The development is located in Tract D,
which was designated as a QOZ in 2018 under prior
§ 1400Z-1. The development is not located in a tract
that was designated as a QOZ effective January 1,
2027. The mixed-use development satisfies the safe
harbor in section 5.01(2) and acquisitions of tangible
property made pursuant to the plan may qualify as
QOZBP if they are made in a manner substantially
consistent with the plan.
(v) Example 5— Property acquired pursuant to
a working capital safe harbor plan adopted prior
to December 31, 2026. The facts are the same as
example 4, except that in November 2027 it becomes
apparent that the residential development is over
budget, delayed by three months, and will require
additional capital to complete a portion of the resi-
dential development that includes a swimming pool
for use by apartment residents. In December 2027,
QOF A acquires additional stock of QOZB B solely
in exchange for cash. The cash received by QOZB B
in December 2027 is expended in accordance with
the initial master plan established in 2024 to com-
plete the residential apartment complex, including
the completion of the swimming pool. The residen-
tial development is completed and placed into service
by March 2029. The swimming pool was an integral
part of the initial master plan established by QOZB B
in May 2024. See § 1.1400Z2(d)-1(d)(3)(vi)(A). The
commercial and residential real property may qual-
ify as QOZBP assuming the other requirements of
§ 1400Z-2(d)(2)(D) are met. Because the stock was
acquired in exchange for cash needed to complete
development of the project, it may be treated as hav-
ing been acquired after the applicable date pursuant
to section 5.01(2)(c) of this notice.
.02 Compliance tests after a QOZ des-
ignation period ends.
(1) In general. Section 70421(c)(3) of
the OBBBA amended prior § 1400Z-2(c)
by providing that, in the case of any qual-
ifying investment held by the taxpayer for
at least 10 years and with respect to which
the taxpayer makes an election under that
subsection, the basis of such qualifying
investment equals its fair market value on
the earlier of (i) the date such qualifying
investment is sold or exchanged, or (ii) the
date that is 30 years after the date of that
qualifying investment. Section 1400Z-2(c)
is effective for amounts invested in QOFs
after December 31, 2026. See § 70421(c)
(5)(A) of the OBBBA. Prior § 1400Z-2(c)
allowed a taxpayer holding a qualifying
investment for at least 10 years to make an
election under prior § 1400Z-2(c) to adjust
the basis of the property equal to the fair
market value of that qualifying investment
on the date that qualifying investment was
sold or exchanged (without regard to the
number of years that have passed since the
date of the qualifying investment). Section
1.1400Z2(c)-1(c) provides that, for dispo-
sitions occurring before January 1, 2048,
the ability to make an election under prior
§ 1400Z-2(c) for qualifying investments
held for at least 10 years is not impaired
solely because, under § 1400Z-1(f), the
designation of one or more QOZs ceases to
be in effect. See also § 1.1400Z2(c)-1(d),
Example 1. Section 1400Z-2(d) contains
multiple requirements the satisfaction of
which are dependent on whether property
owned by a QOF or QOZB, or a trade or
business engaged in by a QOF or QOZB,
is located in a QOZ. Given that § 1400Z-
2(c) and § 1.1400Z2(c)-1(c) contemplate
the ability to continue a qualifying invest-
ment made in a QOZ after its designa-
tion as a QOZ ceases to be in effect, the
Treasury Department and the IRS expect
that the forthcoming proposed regulations
will include the following safe harbors for
QOFs and QOZBs to continue to satisfy
these requirements after the expiration of
a QOZ’s designation period.
(2) Substantial use element of the defi-
nition of QOZBP. For tangible property
to qualify as QOZBP, substantially all of
the use of that property must be in a QOZ
for substantially all of the entity’s holding
period for such property. See § 1400Z-
2(d)(2)(D)(i)(III); see also § 1.1400Z2(a)-

July 6, 2026 38 Bulletin No. 2026–28
1(b)(3). If property otherwise qualifies as
QOZBP, a QOF or QOZB that acquires
that property on or before the expiration
of its QOZ designation period (December
31, 2027, or December 31, 2028, as appli-
cable), or pursuant to sections 5.01(2) or
5.01(3) of this notice, may continue to
treat a previously designated QOZ the
designation of which has expired as a
QOZ solely for purposes of § 1400Z-2(d)
(2)(D)(i)(III) through December 31, 2047.
(3) QOZB Compliance Tests. For
an entity to qualify as a QOZB, at least
50 percent of its gross income must be
derived from the active conduct of a trade
or business in a QOZ, and a substantial
portion of its intangible property must be
used in the active conduct of a trade or
business in a QOZ. See § 1400Z-2(d)(3)
(A)(ii); see also § 1.1400Z2(d)-1(d)(3)(i)
and (ii). A QOZB that has begun to engage
in the active conduct of a trade or business
within a previously designated QOZ on
or before the expiration of its QOZ des-
ignation period (December 31, 2027, or
December 31, 2028, as applicable), or that
reasonably anticipates to begin doing so in
accordance with a written plan that meets
the requirements of section 5.01(2) of this
notice, may continue to treat a previously
designated QOZ the designation of which
has expired as a QOZ solely for the pur-
poses of § 1400Z-2(d)(3)(A)(ii) through
December 31, 2047.
SECTION 6. APPLICABILITY DATE
The Treasury Department and the IRS
anticipate that the forthcoming proposed
regulations will propose that the final reg-
ulations, once published in the Federal
Register, would apply to taxable years
ending after the date this notice is issued
to the public. See § 7805(b)(1)(C).
SECTION 7. DRAFTING AND
CONTACT INFORMATION
The principal author of this notice
is Maria Castillo Valle of the Office of
Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this notice, contact Ms. Castillo
Valle at (202) 317-7006 (not a toll-free
number).

Bulletin No. 2026–28 i July 6, 2026
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

July 6, 2026 ii Bulletin No. 2026–28
Numerical Finding List
1
Bulletin 2026–28
Notices:
2026-39, 2026-27 I.R.B. 1
2026-38, 2026-28 I.R.B. 30
2026-40, 2026-28 I.R.B. 33
Revenue Rulings:
2026-12, 2026-28 I.R.B. 27
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2026–27 through 2026–52 is in Internal Revenue Bulletin
2025–52, dated December 21, 2025.

Bulletin No. 2026–28 iii July 6, 2026
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2026–28
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2026–27 through 2026–52 is in Internal Revenue Bulletin
2025–52, dated December 21, 2025.

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