6/12/20: Read the latest IRS deadline extensions for Opportunity Zone Funds here.

IRS Extension Spurs Indications for an Increase in OZ Fund Investments

The COVID-19 pandemic has created a nationwide unemployment rate now estimated at 15 percent. In response to this economic upheaval, the IRS has extended time to invest in Opportunity Zone funds by issuing Notice 2020-23 perhaps creating many benefits for investors.

This notice is the most recent tax relief announcement provided by the IRS and Treasury in response to the President’s issuance of an emergency declaration covering the COVID-19 pandemic on March 13, 2020.  This notice applies extremely broadly and extends the postponement relief available to “affected taxpayers” to include to any person performing a time sensitive act under Section 7805A-1(c)(iv)-(v) of the Procedural and Administrative Regulations or Revenue Procedure 2018-58, which is due to be performed on or after April 1, 2020 and before July 15, 2020.

What are the benefits for an Opportunity Zone investor?

For investors considering an OZ fund investment, this means that if the investor’s original deadline under Internal Revenue Code Section 1400Z-2(a)(1)(A) for investing capital gains into an OZ fund within 180 days of the triggering of the gain would have occurred on or after April 1, 2020 but before July 15, 2020, then that deadline is automatically extended until July 15, 2020.

Investors can invest in an OZ project to defer paying capital gains tax. As a result, the extension will help investors since many of them sold off during the stock market downturn and now have unplanned capital gains. It is no secret that the country needs to rebuild after this crisis, and Opportunity Zones are a unique opportunity at the right time. The incentives for investors are all aligned to help assure an equitable recovery.

“We are now seeing more people interested in impact investing,” said Coleen Danaher, Regional VP of Business Development, at JTC Americas, Formerly NES Financial. “Investing in an OZ Fund provides them this opportunity.”

With over 70 OZ funds under contract, JTC Americasl’s OZ fund administration solution leverages technology to streamline the complicated tax and administrative requirements of fund management, curtailing fraud and abuse, while helping the OZ initiative do the good it’s intended to do.

Tracking and managing the flow of the funds, making sure investment dollars go where they are supposed to and providing 3rd party oversight is crucial in this current financial landscape.

“We feel there is potential for fraud and abuse in the OZ space,” said Danaher. “Many projects have a construction component to them so investment dollars may be required to sit in an operating account for some time, so third-party oversight helps make sure the money goes where it is supposed to go, when it supposed to go. We also track the social impact that the fund is providing in the region in which the OZ is located with iRR®, an objective measuring tool developed by Howard W. Buffett, professor at Columbia and president of Global Impact LLC.”

“People really want to do good in their local communities,” added Danaher. “With COVID-19, we are all taking an introspective look and the time to focus on what is good.”

Watch JTC Americas and our panel of Opportunity Zone experts in our free webinar, Navigating a New Era in Opportunity Zones, by Watch Now.

Visit our Opportunity Zone Education Center to learn more about the many benefits of how JTC Americas can help.