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Coronavirus-Related Tax Relief for Qualified Opportunity Fund Investors


In March, President Trump issued nationwide major disaster declarations, applying to all 50 states. As a part of this declaration, taxpayers were offered a number of different forms of relief. For instance, those affected by the COVID-19 pandemic can now postpone certain tax-related and time-sensitive actions. According to the IRS, these postponements specifically apply to taxpayers who invest in Qualified Opportunity Funds (QOFs). If you need help determining whether you qualify for tax relief for your own investments, you should consider speaking with an experienced Florida tax & IRS attorney who can advise you.

90 Percent QOF Investment Standard

A Qualified Opportunity Fund is any investment vehicle that is organized as a partnership or a corporation for the purpose of investing in a qualified opportunity zone property. Under this definition, an entity would only qualify as a QOF, if it held at least 90 percent of its assets in qualified opportunity zone properties. Normally, when opportunity zone property held by a QOF fails this test, the investor will be required to pay a penalty for each month that it doesn’t meet the standard. Under the recent COVID-19-related tax relief measures, however, this penalty will not apply if the taxpayer can show that the failure can be attributed to a reasonable cause.

180 Day QOF Investment Requirement

In prior years, taxpayers who successfully sold or exchanged property with another person could choose to exclude an amount (not to exceed the aggregate amount) invested in a QOF during the 180 period of time starting on the date of the sale. There were also a number of rules and regulations regarding compliance with this 180 day requirement. However, as a result of the federally declared emergency, all deadlines for the 180 day requirement that would normally have occurred on or after April 1st have been postponed until July 15, 2020.

Working Capital Safe Harbor for QOFs

Before an entity can qualify as an opportunity zone business, its investors must be able to prove that less than five percent of the aggregate sources of the entity’s property can be attributed to non-qualifying financial assets. Generally, the federal tax code excludes all reasonable amounts of working capital that are held in cash, cash equivalents, or loans from the definition of what constitutes non-qualified financial property. Under the new regulations, however, qualified opportunity zone businesses will be granted a safe harbor for treating an amount of working capital as reasonable, but only if they satisfy certain requirements. If granted, a taxpayer can extend the working capital safe harbor period for up to 62 months.

Reach Out to Our Legal Team Today

Please call experienced Florida tax attorney Ronald Cutler, P.A. to learn more about your potential QOF tax relief options during the COVID-19 pandemic. Initial consultations are confidential, personalized, and offered free of charge, so if you have questions about the new QOF tax relief regulations, please call our office at 386-490-9949 or complete one of our online contact forms today.