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January 21, 2021

IRS issues further deadline relief for Qualified Opportunity Zone funds and investors in response to COVID-19 pandemic

In Notice 2021-10, the IRS further extends deadlines for Qualified Opportunity Zone (OZ) investors and Qualified Opportunity Funds (QOFs) after relief granted in Notice 2020-39 (see Tax Alert 2020-1498).

These extended deadlines apply to the 180-day investment window, 30-month substantial improvement requirement, and 90% investment standard requirement. They also apply to the additional time for a Qualified Opportunity Zone Business (QOZB) to expend capital under the working capital safe harbor and for QOFs to reinvest certain proceeds under the Opportunity Zone regulations (TD-9889) (see Tax Alerts 2020-1498, 2020-0056, and 2020-0992).

180-day investment window

Under IRC Section 1400Z-2(a), OZ investors must invest capital gain in a QOF within a 180-day window to receive any OZ tax benefits. This 180-day window generally begins on the date of the sale or exchange resulting in the generation of capital gain.

Notice 2021-10 extends the investment window by giving investors until March 31, 2021, to invest eligible gains into QOFs if the original 180-day window for investment would have ended any time from April 1, 2020 through March 31, 2021. Although the extension is automatic, taxpayers must still file Forms 8949 and 8997 with a timely filed or amended federal income tax return (as extended in Notice 2020-23 (see Tax Alert 2020-0961)).

30-month substantial improvement requirement

Under IRC Section 1400Z-2(d)(2), property can be treated as QOZB property if it is substantially improved by a QOF or QOZB within 30 months of acquisition.

Notice 2021-10 disregards the period beginning on April 1, 2020, and ending on March 31, 2021, in counting the 30-month period for substantial improvement.

90% investment standard

IRC Section 1400Z-2(d)(1) requires QOFs to hold at least 90% of their assets in qualified opportunity zone property (QOZP), determined by averaging the percentage (1) on the last day of the first six months of the QOF's tax year and (2) on the last day of the QOF's tax year.

Under Notice 2021-10, if a QOF has a 90% investment standard test date falling within the period starting on April 1, 2020, and ending on June 30, 2021, and the QOF fails to meet the 90% investment standard, the failure is deemed to be due to "reasonable cause" and does not disqualify the QOF, or investments into the QOF, under IRC Section 1400Z-2. As a result, no penalties are owed, but the QOF must still complete and file Form 8996 with a timely filed federal income tax return (as extended in Notice 2020-23).

QOF reinvestment and working capital safe harbor

Under the IRC Section 1400Z-2 regulations, a QOF generally has an additional 12 months to reinvest "proceeds from the return of capital or the sale or disposition of some or all of its qualified opportunity zone property" if its reinvestment plans are delayed "due to a [f]ederally declared disaster." The QOF must, however, ultimately proceed in accordance with its original reinvestment plan and continuously hold the proceeds in cash, cash equivalents or debt instruments with a term of 18 months or less. QOZBs located in an OZ "within a [f]ederally declared disaster," have an additional 24 months under the final regulations to deploy their working capital in line with their business plan under the working capital safe harbor.

Notice 2020-39 had confirmed that the declaration of a federally declared disaster in all OZs allowed all QOZBs to apply the final regulations' 24-month extension for the working capital safe harbor so long as they otherwise qualified for the safe harbor. Additionally, the 12-month extension to reinvest certain proceeds applied to all QOFs that otherwise qualified, so long as the original reinvestment period included January 20, 2020 (the date of the disaster identified in the federal declarations).

Under Notice 2021-10, all QOZBs holding working capital assets intended to be covered by the working capital safe harbor before June 30, 2021, receive no more than an additional 24 months to expend capital assets, including any relief provided under Notice 2020-39. Consistent with Notice 2020-39, the QOZBs thus receive a safe harbor period of up to 55 months (86 months for start-up businesses).

In addition, Notice 2021-10 applies the additional 12 months for QOFs to reinvest certain proceeds to all QOFs that otherwise qualify, so long as the original reinvestment period included June 30, 2020. This 12-month extension includes any relief provided under Notice 2020-39, allowing a maximum reinvestment window of 24 months.


For OZ investors and QOFs that are attempting to deploy qualified capital gains into OZs, Notice 2021-10 extends the previous relief provided in Notice 2020-39 in the form of additional deadline extensions for investing into QOFs and improving OZ property.

Taxpayers may want to consult with their tax advisors and preparers about the extensions' effects on past or future transactions.


Contact Information
For additional information concerning this Alert, please contact:
Tax Credit Investment Advisory Services
   • Michael Bernier (
   • Rachel Weiss van Deuren (
   • Shel Shi (