IRS Provides Further Opportunity Zone Relief by Extending Timelines

Williams Mullen

Williams Mullen

The IRS recently issued Notice 2021-10, giving opportunity zone (OZ) investors, qualified opportunity funds (QOFs) and qualified opportunity zone businesses (OZBs) further extensions of time under various OZ rules. This latest Notice lengthens prior extensions granted under Notices 2020-26 and 2020-39, as follows:

  • If the last day of a taxpayer’s 180-day investment period to invest funds in a QOF falls on or after April 1, 2020 and before March 31, 2021, the last day of that 180-day investment period is extended from December 31, 2020 to March 31, 2021.
  • For purposes of the 30-month substantial improvement requirement for qualified opportunity zone business property (OZBP), the period from April 1, 2020 through March 31, 2021 is ignored, thereby giving QOFs and OZBs an additional 12 months to substantially improve property. This is an extension of prior relief through December 31, 2020.
  • If an applicable QOF testing date to satisfy its 90% investment standard falls between April 1, 2020 through June 30, 2021, any failure by a QOF to satisfy the 90% investment standard is automatically deemed to be due to reasonable cause under the OZ statute. This provision gives QOFs an additional 6-month window to deploy capital in qualifying OZ property. 
  • OZBs utilizing the 31-month safe harbor for working capital assets prior to June 30, 2021 have up to 24 additional months, for a maximum safe harbor period of up to 55 months total (86 months total for start-up businesses), to expend working capital assets, provided that they otherwise meet the requirements of the safe harbor. While this provision does not offer a further extension of the cumulative safe-harbor period available to OZBs, it extends the availability of the 24-month relief to OZBs beginning their safe-harbor periods between January 1, 2021 and June 30, 2021.
  • Finally, if the 12-month reinvestment period of a QOF includes June 30, 2020, that QOF has an additional 12 months, for a total reinvestment period of up to 24 months, to reinvest in OZ property, provided that all other reinvestment requirements are satisfied. Again, this relief does not extend the reinvestment period beyond a maximum of 24 months.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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