Opportunity Zone Magazine Volume 1, Issue 3 - Page 7

TREASURY RESPONDS TO THE COVID-19 CRISIS BY OFFERING RELIEF FOR THE OZ INDUSTRY
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in an OZ for depreciation purposes (or first uses it in a
manner that would allow depreciation or amortization if
that person were the property’s owner). Used tangible
property acquired by purchase by the QOZB can satisfy
the original use requirement as long as the property was
not previously used or placed in service in the OZ. If the
tangible property had been used or placed in service in the
OZ before it was acquired by purchase by the QOZB, then
the property must satisfy the substantial improvement
requirement. The substantial improvement requirement
provides that, during any 30-month period commencing
after the acquisition date of the tangible property,
additions to the income tax basis with respect to such
property in the hands of the QOZB exceed an amount
equal to the adjusted income tax basis of such property at
The notice provides that the
30-month period to substantially
improve tangible property is tolled
for the period that begins on April
1, 2020 and ends on Dec. 31, 2020.
the beginning of the 30-month period in the hands of the
QOZB.
The Notice: The notice provides that the 30-month
period to substantially improve tangible property is tolled
for the period that begins on April 1, 2020 and ends on
Dec. 31, 2020. To the extent that a QOZB has acquired
tangible property prior to Dec. 31, 2020 and cannot
meet the original use requirement (such as acquiring an
occupied building located in an OZ), the period of time
commencing on the later of the acquisition date, or April
1, 2020, and ending on Dec. 31, 2020, will not count
against the 30-month substantial improvement period.
AUTOMATIC ADDITIONAL 24 MONTHS FOR WORKING
CAPITAL EXPENDITURES
Background: Another requirement for an entity to be
considered a QOZB is that no more than 5% of the average
of the aggregate unadjusted tax bases of the property of
the business can be attributable to nonqualified financial
property (NQFP). NQFP refers to cash and certain other
assets but does not include reasonable amounts of working
capital held in cash, cash equivalents, or debt instruments
with a term of 18 months or less (collectively, Working
Capital Assets), and certain other items.
The regulations provide a safe harbor for determining
whether Working Capital Assets are considered to be
reasonable working capital. Specifically, the working
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