The Internal Revenue Service (IRS) on January 19 provided additional relief for qualified opportunity funds and investors impacted by COVID-19. Specifically, the IRS in Notice 2021-10 builds on relief provided last June in Notice 2020-39 and provides that that:
- Taxpayers have until March 31, 2021, to make an investment in a Qualified Opportunity Fund if their 180-day deadline to do so ended on or after April 1, 2020, and before March 31, 2021;
- If a Qualified Opportunity Fund whose: (1) last day of the first six-month period of a taxable year; (2) or last day of a taxable year falls between April 1, 2020, and June 30, 2021, any failure to meet the 90 percent investment asset test for that taxable year is deemed to be due to reasonable cause;
- The 30-month substantial improvement period for property held by Qualified Opportunity Funds or qualified opportunity zone businesses is tolled for the period beginning on April 1, 2020, and ending on March 31, 2021;
- The working capital safe harbor is extended by not more than 24 months for working capital assets held by qualified opportunity zone businesses before June 30, 2021 (so long as other working capital safe harbor requirements are met); and
- The 12-month deadline for Qualified Opportunity Funds to reinvest capital is extended by not more than 12 months, for a maximum reinvestment period of 24 months, so long as the original reinvestment period included June 30, 2020, and other requirements are met including that proceeds are invested in the manner originally intended before June 30, 2020.
While the opportunity zone deadline relief is welcome, it is unclear how the Biden Administration’s regulatory freeze will impact the guidance. It is possible that this guidance may have to be reviewed and approved by the new administration.
NMHC will continue to keep members apprised of ongoing legislative and regulatory actions related to Opportunity Zones. For more information on NMHC’s advocacy work during the COVID-19 crisis, please visit the NMHC COVID-19 Hub.
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