On June 4, 2020, the IRS issued Notice 2020-39 (the Notice), granting relief to qualified opportunity funds (QOFs) and their investors from some of the opportunity zone (OZ) program’s time-sensitive requirements. This latest tranche of COVID-19-related guidance provides automatic relief with respect to some of the provisions as well as confirmation of the extensions to comply with others in the event of a federally declared disaster available under the OZ regulations.
As a result of the national emergency declarations issued by the president in response to COVID-19, every census tract designated as an OZ is located within a major disaster area as of Jan. 20, 2020. The Notice confirms the federal disaster relief included within the OZ regulations is available to taxpayers.
Critically, a QOZB has additional time to make expenditures pursuant to a working capital safe harbor. A QOZB can utilize up to two consecutive 31-month safe harbors to deploy working capital to acquire or construct property, or start a business within an OZ pursuant to a written plan, without running afoul of certain asset tests. The Notice makes clear that assuming all other parameters of the working capital safe harbor are met, a QOZB will receive not more than an additional 24 months to expend such working capital on account of the federally declared disaster, as provided for under the OZ regulations.
Please reach out to your Baker Tilly tax advisor to discuss how these potential changes may affect your tax situation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.