JUNE 30, 2021 IS AN OPPORTUNITY ZONE COMPLIANCE MEASUREMENT DATE
A reminder that June 30, 2021 is a bi-annual OZ compliance date for existing Qualified Opportunity Funds (QOF) and Qualified Opportunity Zone Businesses (QOZB). On June 30 and December 31 of each year:
- QOFs must measure compliance with the 90% investment standard (i.e., that 90% of the assets held by the QOF are Qualified Opportunity Zone Property); and
- QOZBs must measure compliance with multiple tests, including, but not limited to, the 70% tangible property test, and the restriction against holding more than 5% of total assets in nonqualified financial property.
In IRS Notice 2021-10, the IRS did provide some relief from the June 30, 2021 compliance testing for the QOF 90% investing standard. Specifically, in the case of an QOF whose (i) last day of the first 6-month period of a taxable year or (ii) last day of a taxable year falls within the period beginning on April 1, 2020, and ending on June 30, 2021, any failure by that QOF to satisfy the 90% investment standard for that taxable year is due to reasonable cause so that any failure to satisfy the 90% investment standard for that taxable year is not taken into account for purposes of determining whether the QOF or any otherwise qualifying investments in that QOF satisfy the requirements of section 1400Z-2 and the regulations for any taxable year of the QOF. Notwithstanding this temporary relief in Notice 2021-10, each QOF and QOZB should continue to monitor compliance through June 30, 2021. Without any additional extension of this temporary COVID-19 relief, QOFs and QOZBs must satisfy all compliance requirements after June 30, 2021, or risk penalties. The next bi-annual compliance measurement date is on December 31, 2021.
Please contact your DOZ professional if you have any questions.