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

Jun 05, 2020

Check out the latest update, Notice 2021-10, available here.

The IRS released additional guidance and relief for various opportunity zone requirements during the COVID-19 pandemic. Notice 2020-39 is much anticipated and a great follow-up to the previous guidance issued for certain time-sensitive transactions in Notice 2020-23, which we previously wrote about here

Below is a summary of the various changed aspects in this notice:  

  • The relief originally provided under Notice 2020-23, which allowed for an extension of the 180-day investment requirement for gain deferral until July 15th, 2020, is now extended. Taxpayers with a 180-day investment period ending on or after April 1, 2020, and before December 31, 2020, now have until December 31, 2020, to invest their capital gains into a qualified opportunity fund (QOF).
  • Any failure by a QOF to satisfy the 90% investment standard in qualified opportunity zone property for any semi-annual testing date between April 1, 2020, and December 31, 2020, 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 OZ requirements for that period. 
  • The 30-month substantial improvement period is paused (i.e., tolled) between April 1, 2020, and December 31, 2020.
  • As a result of the Emergency Declaration, all qualified opportunity zone businesses holding working capital assets intended to be covered by the working capital safe harbor before December 31, 2020, 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 the regulations. 
  • If any QOF’s 12-month reinvestment period includes January 20, 2020 (the date of the disaster identified in the Major Disaster Declarations), that QOF receives up to an additional 12 months 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 January 20, 2020. 

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Dannielle Lewis, CPA
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