Extension of Relief for Qualified Opportunity Funds and Investors Announced
February 01, 2021
By Geoffrey Smith
The Notice provides additional relief as follows:
- If the last day of the 180-day investment period within which a taxpayer must make an investment in a QOF in order to satisfy the 180-day investment requirement falls on or after April 1, 2020 and before March 31, 2021, the last day of that 180-day investment period is postponed to March 31, 2021. The taxpayer is still required to make a valid deferral election in accordance with IRS Forms 8949 and 8997 as well as file these forms with a timely filed federal income tax return (including extensions) or an amended federal income tax return for the taxable year in which the gain would be recognized.
- For QOFs with testing dates for their 90-percent requirements between April 1, 2020 and June 30, 2021, the failure to meet the 90-percent requirement will be disregarded for purposes of determining whether the QOF satisfies the requirement and will not give rise to penalties, as having been deemed to be due to reasonable cause. A QOF still must complete Form 8996 with respect to each affected taxable year except that the QOF should place “0” in Part IV, line 8 (penalty). The Form 8996 must be filed with the QOF’s timely filed federal income tax return (including extensions) for the affected taxable year.
- For non-new tangible property acquired by a QOF or a qualified opportunity zone business (“QOZB”), the period from April 1, 2020 to March 31, 2021, is disregarded in determining any 30-month substantial improvement period.
- As a result of the declaration of a “federally declared disaster” due to COVID, all QOZBs holding working capital assets intended to be covered by the “working capital safe harbor” before June 30, 2021 receive not more than an additional 24 months, for a maximum safe harbor period of not more than 55 months total (i.e., potentially up to 86 months for start-up businesses) to expend the working capital.
- If a QOF had previously disposed of a qualifying investment and was seeking to reinvest in a new qualifying investment which it is required to do within 12 months of the disposition to be treated as continuously invested in qualifying investments and if the 12-month period includes June 30, 2020, the QOF will have an additional 12 months to make the reinvestment provided the QOF satisfies requirements under Treasury Regulation 1.1400Z2(f)-1(b)(1) and invests the proceeds in the manner originally intended before June 30, 2020.
EisnerAmper will continue to keep you up to date on relevant new developments regarding the taxation of QOFs and their investors.