IRS Extends Due Dates for Opportunity Zone Investments & Funds

Thoughtware Alert Published: Jan 29, 2021
Real Estate 14 - TW

The IRS recently extended some key dates for Opportunity Zone investments and key tests related to Qualified Opportunity Funds (QOF). In Notice 2021-10, the IRS provides additional relief to QOFs and their investors in response to the COVID-19 pandemic. Notice 2021-10 extends the relief previously granted in Notice 2020-39

Here are key dates that were extended for QOFs and investors:

  • If the 180-day reinvestment window falls on or after April 1, 2020, and before March 31, 2021, the reinvestment date is postponed until March 31, 2021—a welcome three-month extension of time for investors to reinvest.
  • For existing assets purchased by a QOF or a qualified Opportunity Zone business (QOZB), the period starting on April 1, 2020, and ending on March 31, 2021, is disregarded when determining the 30-month substantial improvement period. Again, this is a three-month extension that helps a QOF or QOZB meet the substantial improvement test.
  • QOFs are provided an automatic reasonable cause exception to meet the 90 percent investment standard if the last day of the first six-month period of the tax year, or the last day of the tax year, falls within the period starting on April 1, 2020, and ending on June 30, 2021.
  • A QOZB relying on the working capital safe harbor receives an additional 24 months, for a total of 55 months, to meet the safe harbor. Startup businesses receive an additional 24 months, for a total of 86 months, to meet the safe harbor.
  • If a QOF’s reinvestment period includes June 30, 2020, the QOF receives an additional 12 months to reinvest a return of capital or a sale of QOF qualified property. Because this also includes relief provided under Notice 2020-39, the maximum reinvestment period adds up to a total of 24 months under both IRS notices.

The IRS extensions provided in Notice 2021-10 grant welcome relief to many QOFs and QOZBs facing delays and challenges related to the pandemic. Use the additional time wisely.

For more information, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.

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