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IRS Notice 2020-39 Provides Relief to Qualified Opportunity Zone Investors

06.16.2020

The IRS has temporarily modified some key Qualified Opportunity Zone (QOZ) provisions in response to disruptions caused by the COVID-19 pandemic. The QOZ program outlines specific guidelines that investors must follow to successfully defer eligible gains by investing them into Qualified Opportunity Funds (QOFs). Notice 2020-39 provides relief and guidance for navigating the QOZ process during the COVID-19 pandemic.

According to Notice 2020-39, if the last day of the 180-day investment period within which a taxpayer must make an investment in a QOF in order to satisfy the 180-day investment requirement falls on or after April 1, 2020 and before December 31, 2020, then the last day of that 180-day investment period is postponed to December 31, 2020. This relief is automatic.

Additional highlights of the IRS’ guidance include:

  • Time to improve property suspended nine months. April 1 through December 31, 2020, will be suspended for purposes of the 30-month period to substantially improve the property.
  • 90 percent asset rule relaxed. If a QOF fails to hold at least 90 percent of its assets in a QOZ property on any semi-annual testing date between April 1 and December 31, 2020, because of a reasonable pandemic-related cause, the QOF will not be liable for penalties during this period. This failure must not prevent qualification of an entity as a QOF or an investment in a QOF from being a qualifying investment.

For more information on the process of QOF investments, please contact Debbie Vandeven, Tax Partner, at dvandeven@bswllc.com or 314.983.1386.

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