IRS Notice Extends Several Opportunity Zone Investment Deadlines

The Internal Revenue Service (IRS) issued Notice 2021-10 on January 19, 2021 that extends several deadlines related to investments in qualified opportunity zones (QOZ) and by qualified opportunity funds (QOFs).

180-Day Window Extended.  Of particular importance, Notice 2021-10 provides an extension to taxpayers’ 180 day reinvestment window in QOFs due to the COVID-19 pandemic.  Henceforth, taxpayers who recognized a capital gain in late 2019 may now have until March 31, 2021 to invest in a QOZ Fund.  In practice, any capital gain recognized on or after October 4, 2019 and before October 2, 2020, there is no 180-day period but rather a single deadline of March 31, 2021. This means that capital gains from the stock market sell-off last February and March may be invested in a QOZ through March 31, 2021.  The deadline to invest in a QOF for these taxpayers is now automatically extended to March 31, 2021.

30-Month Substantial Improvement Deadline Extended. The 30-month substantial improvement period is henceforth tolled from April 1, 2020, through March 31, 2021.  Accordingly, failing to achieve the 90% investment standard will be deemed reasonable if the last day of its first six-month period of a taxable year or last day of a taxable year falls from April 1, 2020 -June 30, 2021, and the QOF meets other requirements.

Working Capital Safe Harbor.  All QOZ businesses holding working capital assets in reliance upon the QOZ intended to be covered by the working capital safe harbor before June 30, 2021, receive up to 24 months additional time. If a QOF’s 12-month reinvestment period includes June 30, 2020, the QOF receives up to an additional 12 months to reinvest.

IRS Notice 2021-10 can be read in full here: https://opportunitydb.com/wp-content/uploads/2021/01/n-21-10.pdf.