IRS, Citing COVID-19, Backs Off Some Opportunity Zone Requirements

The IRS announced Thursday that it was easing off some requirements for the Opportunity Zone program and will give taxpayers more time to meet certain deadlines because of the Covid-19 pandemic.

For instance, people trying to defer capital gains taxes generally have 180 days to invest the proceeds from a sale into one of the investment vehicles set up by the program to put money into struggling areas, which are called Qualified Opportunity Funds.

But the IRS said Thursday that investors would have until the end of the year to meet that requirement, as long as their 180-day deadline fell on or after April 1.

Those funds also have 30 months to improve properties obtained through the Opportunity Zone program, which was created in the 2017 GOP tax law. But now, the IRS says that the nine months between the start of April and the end of December won’t count toward that two-and-a-half year clock.

And the IRS said it wouldn’t penalize any investment vehicle that fails during those same nine months to meet the requirement to hold at least 90 percent of its assets in Opportunity Zone properties.

Sen. Tim Scott (R-S.C.), one of the chief architects behind the Opportunity Zone program, hinted in a webcast earlier this week that he expected IRS relief to be coming.

Organizations like the Economic Innovation Group and the Novogradac Opportunity Zones Working Group, which had been lobbying the IRS to relax some of the program’s requirements, said the agency generally addressed their concerns with Thursday’s changes.

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