Modifications for investments in qualified opportunity funds

(a) Termination of election (1) In general Section 1400Z–2(a)(2), as amended by section 70421(c)(1) of Public Law 119–21, is amended to read as follows: (2) Election Except as provided in paragraph (3), no election may be made under paragraph (1) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect.. (2) Special rules Section 1400Z–2(a) is amended by adding at the end the following new paragraph: (3) Special rules for applicable taxpayers and entities For purposes of paragraph (2)— (A) In general No election may be made under paragraph (1) with respect to a sale or exchange if— (i) except as provided in subparagraph (B), in the case of a taxpayer which is (or ever was) an applicable taxpayer, such sale or exchange is on or after the first day of the first taxable year for which the taxpayer was an applicable taxpayer, and (ii) in the case of an applicable entity, a notice received by the entity under subsection (b)(2)(A) or (c)(2) of section 493 is in effect at the time of such sale or exchange. (B) Special rule for 2025 In the case of a taxpayer which would be an applicable taxpayer for its first taxable year beginning in 2025 (determined as if part IV of subchapter E applied to taxable years beginning in 2025), subparagraph (A)(i) shall be applied by substituting September 17, 2025 for the date otherwise specified in such subparagraph. (C) Definitions For purposes of this paragraph and subsection (c), any term used in this paragraph which is also used in part IV of subchapter E shall have the same meaning as when used in such part.. (b) Modification of special rule for investments held 10 years Section 1400Z–2(c), as amended by section 70421(c)(3) of Public Law 119–21, is amended— (1) by striking In the case of and all that follows and inserting: (1) In general Except as provided in paragraph (2), in the case of, and (2) by adding at the end the following new paragraph: (2) Special rule for applicable taxpayers and entities In the case of any taxpayer who is an applicable taxpayer for any taxable year during which such investment was held by the taxpayer or any taxpayer which is an applicable entity, the basis determined under paragraph (1) of any investment held for at least 10 years shall be the lesser of— (A) the fair market value of such investment as of the last day of the taxable year which includes the later of— (i) the date that such investment has been held for 10 years, or (ii) in the case of— (I) an applicable taxpayer, the date that such taxpayer first became an applicable taxpayer, or (II) an applicable entity, the first date a notice was received by the entity under subsection (b)(2)(A) or (c)(2) of section 493, or (B) the fair market value of such investment on the date that investment is sold or exchanged (or, if earlier, the date described in paragraph (1)(B)).. (c) Effective date The amendments made by this section shall apply to sales or exchanges after September 17, 2025, in taxable years ending after such date.