Opportunity Zones Resources
IRS Further Eases OZ deadlines in light of COVID-19
On Jan. 19, the Internal Revenue Service released Notice 2021-10, “Extension of Relief for Qualified Opportunity Funds and Investors Affected by the Ongoing Coronavirus Disease 2019 Pandemic.” The notice made changes to deadlines pertaining to several rules that affect funds and investors, including:
- The 180-day investment requirement for Qualified Opportunity Fund investors
- The 30-month substantial-improvement period for Qualified Opportunity Funds
- The 90-percent investment standard for Qualified Opportunity Funds
- The working capital safe harbor for Qualified Opportunity Zone Businesses
- The 12-month reinvestment period for Qualified Opportunity Funds
180-day rule
Typically, investors have 180 days after realizing a capital gain to invest that gain in a Qualified Opportunity Fund or they do not get the related tax benefits. IRS has extended that deadline several times. Under the most recent extension, “if the last day of the 180-day investment requirement falls on or after April 1, 2020 and before March 31, 2021, the last day of the 180-day investment period is March 31, 2021.” Taxpayers don’t have to do anything to get this extension—it’s automatic—but they still need to file a valid deferral election by completing form 8949, complete form 8997 and file a federal income tax return with forms 8949 and 8997.
30-month substantial improvement rule
Qualified Opportunity Funds and Qualified Opportunity Zone Businesses that own property that must be substantially improved typically have 30 months to compete that improvement, though that can be extended. The period had been extended previously, and the latest notice states that “for purposes of the substantial improvement requirement … the period beginning on April 1, 2020, and ending on March 31, 2021, is disregarded in determining any 30-month substantial improvement period.”
90-percent investment standard
A Qualified Opportunity Fund typically gets assessed at the mid-point and end-point of its tax year to assure that at least 90% of its assets are invested in qualified property or businesses in Opportunity Zones. Funds are assessed financial penalties, unless the failure to meet the standard is deemed reasonable. IRS already had announced that any fund that hit the mid-point or end-point of its tax year between April 1, 2020 and Dec. 31, 2020, would have its failure to met the 90% rule deemed reasonable. The latest notice extends that time period through June 30, 2021.
Working capital safe harbor
Qualified Opportunity Zone Businesses may set aside working capital for projects that have a written plan and schedule if they follow the plan and schedule and use the money to accomplish it. The working capital “safe harbor” usually lasts 31 months, but it can be extended by to 62 months in some cases. A previous IRS notice said that Qualified Opportunity Zone Businesses that had working capital assets intended to be covered by the safe harbor before Dec. 31, 2020 could have up to 24 additional months to expend the assets, so long as the businesses otherwise met requirements for the working capital safe harbor. The January 2021 notice extend that Dec. 31 date to June 30, 2021.
12-month reinvestment period for Qualified Opportunity Funds
Qualified Opportunity Funds typically have 12 months to reinvest proceeds from a return of capital or sale or disposition of Opportunity Zone property. Under a prior IRS notice, funds whose 12-month period included Jan. 20, 2020 got up to an additional 12 months to reinvest in Qualified Opportunity Zone Property. The latest notice adds the date of June 30, 2020 to this provision, so funds whose 12-month period includes either Jan. 20, 2020, or June 30, 2020, get up to 12 additional months to reinvest.
These deadline changes may affect optimal timing for forming funds, investing in funds, making Opportunity Zone acquisitions and developing OZ project timelines.
For more information:
- IRS Notice, Jan. 19, 2021
- IRS Opportunity Zones Frequently Asked Questions
- IRS forms and instructions
Analysis:
OZ Best Practices
The White House Opportunity and Revitalization Council publicly released its May 2020 report on best practices last week, which covers best practices for local governments, state governments, charities and philanthropies and Opportunity Funds. It also addresses best practices around leveraging federal resources for Opportunity Zones.
Arizona Opportunity Zones Map
Review Arizona's designated tracts using the Arizona Opportunity Zones Map. Additionally, use the ACA's Arizona Asset Map to identify statewide assets, resources and amenities. Explore across 27 different categories including infrastructure, education resources, land ownership, startup resources and labor force information.
ACA Webinars
Arizona Opportunity Zones Guidance Overview
Explore the second round of guidance with some of Arizona's top Opportunity Zone and Fund experts. Click the links below to watch the webinar and access material from the session. The Arizona Commerce Authority held this webinar on May 15, 2019.
Opportunity Fund Projects: What it Takes to Get a Deal Done
Learn more about what it takes to draw Opportunity Fund investment to your community, your business, your project or your site from Opportunity Fund sponsors, community leaders and economic developers who have closed Opportunity Fund deals in Arizona. The Arizona Commerce Authority held this webinar on November 5, 2019.
Opportunity Zone Forum: Final Regulations Review & Next Steps
Learn more the third round of guidance on Opportunity Zones and Funds released by the U.S. Treasury regarding the timing of capital gains when investors move capital gains into Funds, grace periods and safe harbors that affect various types of investments and take a peek into future Opportunity Zones projects. The Arizona Commerce Authority held this forum on February 27, 2020.
Treasury Guidance Updates
Final Regulations
On December 19, 2019, the U.S. Department of the Treasury and the Internal Revenue Service released final regulations for Opportunity Zones. View the press release.
News Coverage and Analysis:
- “IRS Publishes Final Opportunity Zone Regulations: Putting It All Together,” Forbes
- “Latest Opportunity Zone Rules Give Developers, Investors Breathing Room, Experts Say,” Miami Herald
- “Final Opportunity Zone Regulations Released by Trump Administration,” Bisnow
- “Final Round of Opportunity Zone Rules Unveiled,” Commercial Property Executive
- “Final OZ Regulations—Quick Take,” Notes from Novogradac
Guidance relating to deferral of gains for investments in a qualified opportunity fund
Additional information on the second tranche of guidance released by the U.S. Department of the Treasury on April 17, 2019.
- Treasury's press release
- The text of the second tranche of Treasury guidance
- A White House statement
News Coverage and Analysis:
- Trump Administration Offers New Flexibility in Opportunity Zones, The Wall Street Journal
- Trump's Opportunity Zone Rules Deliver on Investors' Wish List, Bloomberg
- Treasury Issues Rules on Tax Breaks for Opportunity Zones, The New York Times
- Opportunity Zones Are Open For Business: 5 Key Features Of The New Guidance, Forbes
- Clarity Provided by Second Tranche of Treasury Regulations to Incent More Investment in Opportunity Zones Businesses (Part I), Novogradac
Treasury also released a Request for Information, seeking input regarding data collection and tracking of Opportunity Zones. This provides an opportunity for people to suggest what information should be collected about investments in Opportunity Zones.
Additionally, on April 18, the White House Opportunity and Revitalization Council released a list of actions federal government agencies are taking to support development in Opportunity Zones. This includes preferences for efforts in Opportunity Zones supported by funds from the Departments of Labor, Housing and Urban Development, Education, Transportation, Agriculture, Justice, Health and Human Services, the Small Business Administration and the Environmental Protection Agency.
Guidance for investing in qualified Opportunity Funds
The U.S. Department of the Treasury released the first tranche of guidance on Opportunity Zones and Funds on October 19, 2018. The ACA hosted a webinar called the Opportunity Funds Guidance Update on Tuesday, October 30th.
The presentation materials as well as the video of the online webinar are available below.
- Arizona Commerce Authority Opportunity Funds Guidance Update Webinar Presentation
- Opportunity Zones Program Presentation from Marc Schultz
- Opportunity Funds Guidance Update Webinar Video October 2018
News Coverage & Analysis: