The Internal Revenue Service has issued a notice that seeks to expand relief for funds and investors affected by the COVID-19 pandemic.
Notice 2021-10 provides additional relief under section 7508A of the Internal Revenue Code for Qualified Opportunity Funds (QOFs) and their investors relating to the coronavirus pandemic.
Specifically, the notice extends relief already spelled out in Notice 2020-39, 2020-26 I.R.B. 984 that applies to QOFs and their investors.
What are the key provisions of Qualified Opportunity Fund relief?
While Qualified Opportunity Funds received one round of relief in 2020, this latest notice expands on that in a number of key areas:
The 180-day investment requirement for QOF investors: A taxpayer has a 180-day window to make an investment in a QOF that satisfies requirements. If the last day of the investment period falls on or after April 1, 2020, and before March 31, 2021, the last day of that 180-day investment period is pushed back to March 31, 2021.
The 30-month substantial improvement period for QOFs and Qualified Opportunity Zone firms: The original rules for Qualified Opportunity Funds also set out a specified 30-month period to make substantial improvements to the property held by an QOF or other Qualified Opportunity Zone business.
This new notice says the period starting on April 1, 2020 and ending on March 31, 2021 “is disregarded in determining any 30-month substantial improvement period.”
Other relief measures: This notice also provides additional relief pursuant to section 1400Z-2(f)(3) and Income Tax Regulations under section 1400Z-2 of the Code (section 1400Z 2 regulations).
Many of the extensions and additional relief are automatic; Qualified Opportunity Funds do not have to call the IRS or send letters or other documents to the agency to get the relief. However, certain steps may be needed and additional forms completed to be filed with the QOF’s federal income tax return.
See the notice and Form 8996 instructions for more details.