Treasury Announces More Flexibility for Opportunity Zones

On June 4, in response to the ongoing COVID-19 pandemic, Treasury provided increased flexibility for Qualified Opportunity Funds (QOF) and their investors with the release of Notice 2020-39. Find the full notice here and a summary of the highlights below. For more general information on QOFs, check out our Opportunity Zone page.

Notice 2020-39 Highlights

180-Day Investment Extension

Investors that have realized a gain and have their 180-day window to invest such a gain into a QOF closing on or after April 1, 2020, and before December 31, 2020, automatically get an extension of time to make this investment until December 31, 2020. Note that there are logistical issues with deferring the investment date past the extended due date of your tax return on which you are claiming the gain deferral, so some taxpayers will be limited to either September 15, 2020, or October 15, 2020, for this extended investment window, if relating to 2019 gains.

90% Investment Standard for QOFs

Funds that fail to meet the 90% qualified asset testing during April 1, 2020, through December 31, 2020, will be deemed to have done so for “reasonable cause.” Therefore, they will not fail to qualify as a QOF and won’t be liable for any associated penalties.

30-Month Substantial Improvement Period

For property requiring substantial improvement within a 30-month period to qualify for opportunity zone testing purposes, this 30-month period now disregards the period between April 1, 2020, and December 31, 2020, increasing the amount of time available to improve the property.

Working Capital Safe Harbor

This notice reminds qualified opportunity zone businesses that, per the final regulations, projects may receive up to an additional 24-month working capital extension due to the COVID-19 pandemic. This is in addition to the original 31-month working capital safe harbor.

12-Month Reinvestment Period

This notice reminds taxpayers that, due to the COVID-19 pandemic, QOFs that experience a realization event have an additional 12 months to reinvest those amounts in the same manner intended before the pandemic.

As always, with Opportunity Zone investing, the details are important. If you need help navigating the new rules, please contact our team—we are here to help.