Puerto Rico has been specifically approved as a qualified OZ.
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How can a QOF be considered domestic in Puerto Rico when entities organized under the laws of Puerto Rico are considered foreign entities for U.S. federal income taxes?
How can a QOF be considered domestic in Puerto Rico when entities organized under the laws of Puerto Rico are considered foreign entities for U.S. federal income taxes?
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I believe this is a creature of the Treasury Regulations for the OZ statute. For the purposes of the OZ rules, the entity will be a QOF, but for purposes of the rest of the tax law, the entity still gets special treatment with a situs in a U.S. territory. For a citation, check out Treasury Regulation section 1.1400Z2(d)-1(a)(1)(ii)(B).
The regulations provide that if the QOF is created in Puerto Rico, it must invest exclusively in a property located in Puerto Rico in order to meet the domestic requirement.
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