On January 19, 2021, the IRS issued guidance in the form of Notice 2021-10, which extends many timelines related to opportunity zone funding.
- Opportunity zone gain deferrals can still be made for 2019.
- Investments in opportunity zone businesses and property can be delayed without triggering penalties.
- Improvement and reinvestment periods have been extended.
Need help navigating recent IRS guidance?
One element of COVID-19 relief that isn’t splashed across the headlines like stimulus checks or Paycheck Protection Program loans is the extension of timelines designed to encourage investment in opportunity zones. Review recent IRS guidance.
IRS extends opportunity zone deadlines
Additional time for investment in a qualified opportunity zone fund (QOF)
The IRS released new guidance around investor gain investment and deferral elections. The crucial last investment day of a 180-day period which falls in the period of April 1, 2020, through March 31, 2021, is now extended to March 31, 2021. Investing in an opportunity zone before this deadline means you have more time to receive the potential tax benefits.
Substantial improvement period for qualified opportunity zone businesses (QOZBs) and QOF
The 30-month substantial improvement period provided in Treasury regulations is tolled from April 1, 2020, through March 31, 2021. Due to this, the months between April 1, 2020, and March 31, 2021, are not counted as part of the 30-month period, which effectively establishes a possible 42-month substantial improvement period.
Extended “working capital safe harbor” periods
All opportunity zone businesses holding working capital assets intended to be covered by WCSH before June 30, 2021, may receive “up to an additional 24 months” to complete their project. The maximum WCSH period is therefore 55 months (86 months in the case of a start-up business).
Reinvestment period of one year for QOFs
If a QOF recognizes “interim gain” for which their reinvestment period includes June 30, 2020, then the QOF may receive “up to an additional 12 months” to reinvest such gains — including any relief provided by prior IRS guidance. The maximum reinvestment period is not to exceed 24 months.
Suspension of penalty under 90% investment standard
A QOF’s failure to pass the “90% investment standard” will be deemed subject to the “reasonable cause” exception provided in regulations, if the last day of its first six-month period of a taxable year or last day of a taxable year falls between April 1, 2020, and June 30, 2021.
How we can help
These changes can significantly alter your real estate investment and tax strategies. CLA’s tax professionals and wealth advisors can help you understand whether an opportunity zone investment could help you reach your goals.
Securities products, merger and acquisition services, and wealth advisory services are provided by CliftonLarsonAllen Wealth Advisors, LLC, a federally registered investment advisor and member FINRA, SIPC.