Revisions to or Replacements of Working Capital Safe Harbor Plans
Although the final Treasury regulations, Notice 2021-10, and Notice 2020-39 helpfully provide a QOZB with an additional 24 months (on top of the existing 31-month deployment allowance for any single infusion of cash into a QOZB) to expend its working capital assets in light of the COVID-19 pandemic, they do not exempt the QOZB from the requirement that it must do so in a manner substantially consistent with the original, pre-disaster written plan. As we noted
here at the time of the publication of the pandemic relief for QOFs and QOZBs, given that many such vehicles were formed to facilitate investment in business sectors heavily disrupted by the pandemic, the failure to expressly allow written plan revisions to adapt to the effects of the pandemic was a serious hole in the otherwise favorable IRS pandemic guidance for QOFs and QOZBs, and left many advisors hoping that their clients could make such revisions and rel
Here is a summary of the extended relief:
The Notice further extends the 180-day deadline for taxpayers to invest eligible gains in a qualified opportunity fund. Now, if a taxpayer’s 180-day deadline to invest eligible gains in a qualified opportunity fund was or is on or between April 1, 2020 and March 31, 2021, then the deadline has been automatically extended to March 31, 2021. However, a taxpayer who sells an asset that generates eligible gains in 2020 will still need to make a valid deferral election in accordance with the instructions to Form 8949, complete Form 8997, and file the completed Form 8949 and Form 8997 with a timely filed Federal income tax return (including extensions) or amended Federal income tax return for 2020 even if the taxpayer invests the eligible gains in a qualified opportunity fund in 2021.