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Opportunity Zone Deadlines Extended by IRS Due to COVID-19, Creates Timing Uncertainty

    • IRS Notice 2020-39 extends investment deadline to December 31, 2020
    • It also extends other benchmarks, such as 90% Asset Test or 30-month substantial improv. period
    • Delay has welcomed relief to both investors and qualified opportunity zones
    • Investors unclear how to take a deduction if taxes filed before an investment is made

The Internal Revenue Service continued its mission to provide needed relief to the business community since the outbreak of the Coronavirus pandemic in March, turning its gaze this week to the popular Opportunity Zone (OZ) program. Created in December 2017 under the Trump Administration as part of the Tax Cuts and Jobs Act, the Opportunity Zone program was created to promote long-term investments in economically distressed communities. Each state in the United States showcases OZs, which have amassed nearly 10% of the geography in the United States and Puerto Rico, combined.

Opportunity Zones have gained popularity since their inception, offering a multitude of benefits to investors such as initial gains deferral and partial reduction in deferred gains taxes. Originally, investors in OZs needed to adhere to a set of investment timelines in order to retain the tax benefits reaped by the OZ program. Due to COVID-19, the IRS has chosen to relax some of these requirements to ease the burden on both investors and those who reside in opportunity zones:

    • 180 Day Investment Period –> Extended from July 15 to December 31, 2020
    • 90% Asset Tax –> Relaxed for 2020, test failures to be “disregarded”
    • 30 Month Working Capital Safe Harbor –> Extended an additional 24 months
    • 12 Month Reinvestment Period –> Extended up to 12 additional months for Qualified Opportunity Funds

The timing of extension once again presents investors with a unique problem. If an investor files their tax return on or before October 15th but do not make their investment into the OZ until November or December (in compliance with the updated guidelines), how does the investor take the deduction on their 2019 tax return? Unfortunately, Notice 2020-39 was silent on this front, creating confusion amongst investors and taxpayers alike.

For more information or to discuss further, visit out DSJCPA website or call our offices at (516) 541 – 6549 to speak with our team and learn more about how this change in the tax laws can positively affect your business!


Anthony Perrone
Financial Services Partner

516-541-6549 | Email

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