IRS Extends Certain Deadlines for Qualified Opportunity Zone Investors

In response to the COVID-19 pandemic, the IRS extended certain deadlines that qualified opportunity zones (QOZ) investors and qualified opportunity funds (QOFs) must meet to qualify for tax benefits. Notice 2020-39 extended deadlines for the 180-day investment period, 30-month substantial improvement period, working capital safe harbor, 90 percent investment standard, and 12-month reinvestment period that fall between April 1, 2020 and December 31, 2020.

180-day investment period: The last day of the 180-day investment period within which a taxpayer must make an investment in a QOF is postponed until December 31, 2020, if their original 180-day period would have ended on or after April 1, 2020, and before December 31, 2020. The extension is automatic, but taxpayers must still file Form 8949 and Form 8997 with their timely filed or amended Federal income tax return (including extensions) for the tax year in which the gain would be recognized if the 180-day period did not apply.

Relief for 30-month substantial improvement period: The period beginning on April 1, 2020, and ending on December 31, 2020, is disregarded in counting any 30-month substantial improvement period. In other words, the 30-month substantial improvement period is tolled during the period beginning April 1, 2020, and ending on December 31, 2020,

Extension of working capital safe harbor: The working capital safe harbor period is extended an additional 24 months. Thus, every QOZ business can have up to 55 months to expend working capital assets and a start-up QOZ business can have up to 86 months to expend working capital assets.

Relief for 90 percent investment standard: Automatic relief is granted for a QOF that has a 90 percent investment standard measurement date within the period beginning on April 1, 2020, and ending on December 31, 2020. Any failure to satisfy the 90 percent standard for that period is deemed to be due to “reasonable cause” and is disregarded for determining whether the QOF or investments in the QOF satisfy the standard. The relief is automatic, but a QOF must still file a Form 8996 with a timely filed federal income tax return (including extensions) for each affected tax year and place a “0” in Part IV, Line 8, for the penalty amount.

Extension of 12-month reinvestment period: Proceeds from the sale of QOZ property that are reinvested in other QOZ property within 12 months are treated as QOZ property for purposes of the 90-percent investment standard. If a QOF’s 12-month reinvestment period includes January 20, 2020, the QOF may receive an additional 12 months to reinvest such proceeds in QOZ property.

For more information about the QOZ regulations and deadline extensions, contact us. We are here to help.

© 2020