Non-conforming states include: CA, HI, NC, MA, MS, PA. There are also a number of states with no income tax or no tax imposed on capital gains. If you live in a conforming state but invest in a non-conforming state, you will not pay tax up front. But then you will likely have tax implications when the QOF or underling assets are sold. If you live in a non-conforming state you will have less to invest in a QOF since the state will require an up-front payment for the state tax on the initial sale and your new investment will not get basis step-ups in years 5,7 and 10. Also, check your state on whether you need to reinvest within your state vs. being able to invest in other states.