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On June 4th, the IRS issued Notice 2020-39 which addresses specific relief for Opportunity Zone investors and Qualified Opportunity Funds. Specifically, the IRS addressed:
The 180-day reinvestment period for deferring qualified capital gains into a Qualified Opportunity Fund
If a taxpayer’s last day of their 180-day reinvestment period falls after April 1, 2020 and before December 31, 2020, the last day to make a qualified investment is automatically extended until December 31, 2020. I cannot overstate how absolutely massive this provision is. This provides unbelievable flexibility for investors with gains from 2019 and 2020 and should spur significant investment into OZs.
The 90% Investment Standard for QOFs
This effectively suspends the 90% investment threshold for 2020. It will give QOFs additional time to invest funds into qualified opportunity zone businesses, and for those businesses to responsibility and safely deploy those funds in accordance with the OZ laws and regulations.
The 30-month Substantial Improvement Period
The 30-month period is paused during the period of April 1, 2020 to December 31, 2020. If a taxpayer was in the process of performing substantial improvements or begins performing substantial improvements during this window, then they automatically receive an extension of time to complete those improvements.
The Working Capital Safe Harbor
The Emergency Declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act on March 13th triggers an extension of not more than 24 additional months for assets covered under the working capital safe harbor. This gives qualified opportunity zone businesses additional time to properly spend the money raised or borrowed for the acquisition, construction, or substantial improvement of assets.
This is all good news for Qualified Opportunity Funds and their investors. It dramatically changes the OZ landscape in a positive way. If you have any questions about this Notice or Opportunity Zones in general, please reach out to BMMS Partners and Brendan McAuliffe at brendan@bmmscpa.com.
The full text of the notice can be found at IRS Notice 2020-39.