Find Your Specialist


Contact Us

    Go Back

    Opportunity Zone Investors Get Relief from Deadlines, Investment Requirements

    By Bryce Nations and Andrew Case

    As part of its continuing response to the COVID-19 pandemic, the IRS, in Notice 2020-39, has loosened the rules for opportunity zone investments, extending deadlines and relaxing investment standards. The opportunity zone program offers generous tax benefits for investing in designated low-income areas as long as investment timetables are met and qualified opportunity funds (QOFs) hold at least 90% of their assets in qualified property.

    180-Day Investment Window

    Under statutory opportunity zone rules, an investor can defer capital gains from the sale of an asset by rolling gains over into a QOF within 180 days, from the date of sale. The Notice extends the last day of the 180-day period to December 31, 2020, if an investor’s 180-day window ends on or after April 1, 2020, and before December 31, 2020. The 180-day deadline was already extended to July 15, 2020, and Notice 2020-39 extends it another five and a half months, to the end of the year. This relief is automatic, but taxpayers still need to make the deferral election on forms filed with their 2020 Federal income tax return.

    90 Percent Investment Standard

    A QOF must hold at least 90% of its assets in qualified opportunity zone property, determined by the average of the percentage of qualified property held (i) on the last day of the first 6-month period of the taxable year of the QOF, and (ii) on the last day of the taxable year of the QOF. The Notice grants relief from this rule for QOFs that have semi-annual testing dates falling on or after April 1, 2020, through December 31, 2020. Failing to meet the 90% standard will be automatically be considered to be for reasonable cause, no penalties will apply, and the QOF investments will not be disqualified. Again, this relief is automatic.

    Working Capital Safe Harbor

    To be a qualified opportunity zone business, less than 5% of the average of the unadjusted bases of an entity’s property can be attributable to the nonqualified financial property. However, a reasonable amount of working capital is excluded from this definition and is allowed under a safe harbor based, in part, on the entity’s plan to expend those assets over a set period of time. The Notice clarifies that opportunity zone businesses have an additional 24 months in which to expend their working capital assets because of the federally declared disaster.

    30-Month Substantial Improvement Period

    Qualified opportunity funds have 30 months to substantially improve a property for it to be considered qualified property. This rule applies to property where the original use was not by the QOF. The Notice excludes the period from April 1, 2020, through December 31, 2020, in determining the 30-month substantial improvement period, giving investors more time to make improvements.

    12-Month Reinvestment Period for QOFs

    Under the regulations, a QOF has 12 months to reinvest any proceeds received from the sale of qualified opportunity zone property or from a distribution that is a return of capital. Proceeds that are reinvested are treated as qualified opportunity zone property for purposes of the 90% investment standard. The Notice gives QOFs an additional 12 months to reinvest the proceeds if the QOF’s reinvestment period includes January 20, 2020.


    With the loan programs and tax benefits provided by the CARES Act and the volatile stock market, many taxpayers have been concentrating on protecting their current assets rather than proactively seeking out new investments. The IRS’s new rules for opportunity zone investments make it easier to get the most out of these popular investment vehicles, so it may be time to give them a second look. If you have questions about Opportunity Zones, please reach out to your Frazier & Deeter tax advisor.

    About the Authors

    Andrew Case and Bryce Nations are Tax Partners with Frazier & Deeter. They are active in the firm’s Real Estate and Privately Held Business practices.

    Related Articles

    • 01.25.2023

      A New Year Means New Privacy Laws

      Ever since the General Data Protection Regulation (GDPR) came into effect in May 2018, US state privacy laws have been passed in Virginia, Colorado, Connecticut, Utah and, most pressing of them all, California. The California Privacy Rights Act (CPRA) went…

      Continue Reading
    • 01.19.2023

      The New Rules Under Section 174

      Internal Revenue Code Section 174 has long been used by taxpayers to deduct certain expenses related to research and experimentation (R&E) in the current year.  The code section was originally enacted in 1954 to eliminate uncertainty in the tax accounting…

      Continue Reading
    • 12.20.2022

      IRS Customer Service May Improve in 2023

      With 4,000 new customer service representatives and plans to hire 700 new Taxpayer Assistance Center (TAC) employees, taxpayers soon may get relief from endless hold times, no in-person help and unresolved problems.

      Continue Reading
    • 12.12.2022

      Reduce Taxable Income with IRA Distributions Transfers

      IRA owners who are age 70½ or over can transfer up to $100,000 per year to charity to reduce their taxable income. These transfers, known as qualified charitable distributions or QCDs, offer end-of-the year tax savings and can count toward required minimum distributions (RMDs) that taxpayers who are age 72 must make each year. Think of it as a tax-free charitable rollover of IRA funds.

      Continue Reading
    • 12.02.2022

      UK R&D Tax Reliefs – Where Are We Now?

      In the November 2022 Autumn Statement, the Chancellor announced significant changes to the current Research and Development (R&D) tax reliefs. The key announcements were a change to the applicable rate of the Research and Development Expenditure Credit (RDEC) and a…

      Continue Reading
    • 12.01.2022

      1099s Required for 2022 Tax Year

      Taxpayers earning income from selling goods or providing services may receive a Form 1099-K, Payment Card and Third-Party Network Transactions, for the first time in early 2023, when the 2022 forms are due. The requirement to file Forms 1099 have…

      Continue Reading
    • 11.28.2022

      IRS Uncovers $3.1 Billion in COVID Fraud

      The IRS Criminal Investigation department (IRS-CI) has partnered with the Justice Department to uncover and prosecute fraudulent activities related to the federal government’s COVID relief programs. To date, the IRS has conducted 840 investigations involving fraud amounts totaling more than…

      Continue Reading
    • 10.25.2022

      IRS Inflation Reduction Act Increases Funds

      The Inflation Reduction Act of 2022, enacted in August, increased funding for the IRS by $80 billion through 2031 for enforcement activities, operations support, systems modernization and taxpayer services. The legislative language, Treasury Secretary Janet Yellen and IRS Commissioner Charles…

      Continue Reading

    Privacy Overview

    When you use or access the Site, we use cookies, device identifiers, and similar technologies such as pixels, web beacons, and local storage to collect information about how you use the Site. We process the information collected through such technologies, which may include Personal Information, to help operate certain features of the Site (e.g., to prevent online poll participants from voting more than once), to enhance your experience through personalization, and to help us better understand the features of the Site that you and other users are most interested in.

    You can enable or disable our use of cookies per category.
    Always Enabled