Opportunity Zone Magazine Volume 1, Issue 3 - Page 8

8 OPPORTUNITY ZONE MAGAZINE | VOLUME 1 • ISSUE 3
capital safe harbor provides that Working Capital Assets
(i.e. cash, cash equivalents, or debt instruments with
a term of eighteen (18) months or less) can be treated
as reasonable working capital when the following
requirements are satisfied:
• The amounts are designated in a writing that identifies
the Working Capital Assets being held for the
development of a trade or business in an OZ, including
when appropriate, the acquisition, construction, and/or
substantial improvement of tangible property in an OZ;
• There is a written schedule consistent with the ordinary
start-up of a trade or business for the expenditure of
such assets and the schedule demonstrates that such
Working Capital Assets will be spent within 31 months
of receipt by the business (the Working Capital Safe
Harbor Period); and
• The Working Capital Assets are actually used in
a manner that is substantially consistent with the
above-mentioned written designation and the written
schedule (collectively, the Working Capital Plan).
Additional 31-month Working Capital Safe Harbor Periods
can be obtained for subsequent infusions of Working
Capital Assets for an overall period of 62 months from the
date of the original infusion of Working Capital Assets, but
each infusion needs to separately satisfy the working capital
safe harbor provisions. If the QOZB is located within a
federally declared disaster area, the QOZB may receive
not more than an additional 24 months to consume its
Working Capital Assets, as long as it satisfies the working
capital safe harbor provisions.
The Notice: It was not clear in the regulations whether
obtaining the additional 24 months to the Working
Capital Safe Harbor Period was automatic. The notice
confirmed that the Working Capital Safe Harbor Period is
extended by an additional 24 months for QOZBs located
in a federally declared disaster area and holding Working
Capital Assets intended to be covered by the working
capital safe harbor before Dec. 31, 2020, as long as the
working capital safe harbor provisions are otherwise
satisfied by the QOZB. For example, it is possible for a
QOF that makes a cash contribution to a QOZB on Dec.
30, 2020, to have a Working Capital Plan that expends
such cash over a 55-month period. This is also helpful in a
situation where a QOZB is currently holding cash subject
to a Working Capital Plan. In such a case, the QOZB is
able to expend those proceeds over an additional 24-month
period.
It appears possible to extend the aggregate duration of
the Working Capital Safe Harbor Periods up to an overall
period of 86 months. The regulations allow for additional
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