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IRS releases extended guidance on qualified opportunity fund relief

Jan 25, 2021

In Notice 2021-10, the IRS released extended guidance and relief for various opportunity zone requirements during the COVID-19 pandemic.

The additional relief extends to both investors in an opportunity zone fund and those who are operating the qualified opportunity zone fund (QOF) or a qualified opportunity zone business (QOZB):

  • Taxpayers who would have had to make a QOF investment in order to satisfy the 180-day investment period that falls on or after April 1, 2020, and before March 31, 2021, is now postponed until March 31, 2021.
  • Any failure by that QOF to satisfy the 90 % investment standard for that taxable year of the QOF is considered to be deemed due to reasonable cause and disregarded for purposes of determining whether the QOF or any otherwise qualifying investments in that QOF satisfy the requirements under the OZregulations for the taxable year. This applies to any QOF whose last day of the first six-month period of the taxable year or last day of the taxable year falls within the period beginning on April 1, 2020, and ending on June 30, 2021.
  • The 30-month substantial improvement period is paused between April 1, 2020, and March 31, 2021
  • As a result of the Emergency Declaration, all QOZBs holding working capital assets intended to be covered by the working capital safe harbor before June 30, 2021, receive not more than an additional 24 months to expend the working capital assets of the qualified opportunity zone business, as long as the qualified opportunity zone business otherwise meets the requirements of regulations. They can receive a maximum safe harbor period of no more than 55 months in total and a max of 86 months for a startup business.
  • If any QOF’s 12-month reinvestment period includes June 30, 2020, that QOF receives up to an additional 12 months (including any relief under Notice 2020-39) to reinvest in qualified opportunity zone property some or all of the proceeds received by the QOF from the return of capital or the sale or disposition of some or all of the QOF’s qualified opportunity zone property, provided that the QOF satisfies the requirements of the IRC 1400Z-2 and invests the proceeds in the manner originally intended before June 30, 2020. The QOF may receive a maximum reinvestment period of 24 months in total.

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IRS extends and expands qualified opportunity fund relief with Notice 2020-39

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Dannielle Lewis, CPA
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