Pros and Cons of the 180-Day Opportunity Zone Deadline Extension

Jimmy Atkinson

On June 4, the IRS issued a new notice that provides a lot of additional coronavirus relief for Opportunity Zone investors and Opportunity Zone funds.

Will this relief pose short-term challenges for Opportunity Zone capital raising? And might it cause a tsunami wave of investment toward the end of this year?

Click the play button below to listen to this special episode.

Episode Highlights

  • How the 180-day deadline extension applies to different types of gain, and repercussions the extension may have on the Opportunity Zone marketplace.
  • Why the 180-day deadline extension may lead to a tsunami wave of Opportunity Zone investment at the end of this year.
  • Consequences of the deadline extension, both at the investor level and at the fund level.
  • How three separate anticipated waves of Opportunity Zone investment activity have now been pushed back into one large tsunami wave of year-end activity.
  • Relief granted to Qualified Opportunity Funds in meeting their 90 percent investment standard.
  • Relief granted to QOFs and QOZBs in meeting the 30-month substantial improvement period.
  • The automatic 24-month extension applied to a QOZB’s 31- or 62-month working capital safe harbor period.
  • Relief granted to QOFs in complying with the 12-month reinvestment period.

180-Day Investment Deadlines Extended to December 31, 2020

  • Gain recognized by an individual: Between October 4, 2019 and July 4, 2020.
  • Gain recognized through a partnership Schedule K-1: Anytime during the 2019 year.

Featured on This Episode

About the Opportunity Zones Podcast

Hosted by founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Welcome to a special Monday edition of the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. Some huge news in the opportunity zones world as last Thursday, June 4th, the IRS issued Notice 2020-39, which extended more relief for qualified opportunity funds and investors affected by the ongoing COVID-19 pandemic. Most notably, the 180-day investment deadline for investors rolling over gain into opportunity zones was extended until the end of the year. This applies to anyone whose 180-day investment period ends between April 1st and December 31st.

Qualified opportunity funds and qualified opportunity zone businesses were also granted relief for certain compliance deadlines. There’s four big compliance deadlines that were granted extra relief. And we’ll get to those four points in a few minutes here. But in my mind, the big news from this notice is the fact that the 180-day deadline was extended even further. It got pushed back even further to the end of the year. So I’m gonna discuss what exactly happened, who it applies to, and some of the repercussions that will result from this new notice.

So as you may know, under Section 1400Z-2 of the IRS code, that’s the IRS code that deals with opportunity zones tax benefits, taxpayers normally have 180 days to invest gain in a qualified opportunity fund in order to take advantage of the favorable opportunity zone tax treatment. Now, a couple of months ago on April 9th in response to the coronavirus pandemic and President Trump’s disaster declaration, the IRS issued Notice 2020-23, and that provided relief to taxpayers for postponing certain due dates to July 15, 2020. Perhaps most notably it was the tax return and tax payment due date, which is typically on April 15th, that got pushed back automatically to July 15th. But that July 15th extension actually applied to any IRS deadline that fell in the time window between April 1 and July 15. Everything in that window got pushed back to July 15 and that includes taxpayers’ 180-day deadlines for rolling over gain into an opportunity zone fund.

Effectively, what this did was it, if you had a gain at any point toward the end of 2019, any time between October 4th and the end of last year, then your deadline automatically got extended until July 15th. The new notice, this new notice that was issued on June 4th of this year, June 4, 2020, just last Thursday evening, Notice 2020-39, provides even further relief for qualified opportunity zone funds and investors and most notably for investors that are rolling over gain into opportunity zone funds, it further extended their 180-day investment period deadline. Now, for any 180-day period that ends on or after April 1 and before December 31, 2020, the deadline is automatically pushed back to the end of this year to December 31, 2020.

So what does this mean in practical terms? In practical terms, I’m gonna talk about two different types of taxpayers. First, I’ll talk about an individual taxpayer who recognizes gain individually. And then second, I will discuss what happens for taxpayers who are using gain reported on a partnership schedule K-1 because that second case gets special treatment. Well, let’s first talk about that individual taxpayer. For any gain for an individual taxpayer that is recognized on or after October 4th, 2019, and before July 4th, 2020, anytime in that window, there effectively is no longer a 180-day period, but rather simply a 2020 yearend deadline.

So why those dates? So October 4th, 2019 is 180 days prior to April one and July 4, 2020 is 180 days prior to December 31. And forgive me, I know there’s a lot of dates here, and I’ll try to speak slowly and clearly. And then if you have questions or if you want to look at this online, I would recommend looking at the show notes for this episode. I’ll have it outlined very clearly so you can see it visually. You can head over to to find the show notes for today’s episode. But effectively I’m gonna state this again because I think this is important, for any gain recognized on or after October 4th, 2019, and before July 4th, 2020, there is no 180-day period that an investor has to worry about, but rather a 2020 yearend deadline. So the deadline to invest in a qualified opportunity fund for these taxpayers is now just, oh, it’s automatically extended the December 31, 2020.

For any gain recognized on or after July 4th, 2020, the normal 180-day period will once again apply because then that starts taking you out into 2021. So that example is for a taxpayer that recognizes gain individually. What about taxpayers who are using gain reported on a partnership schedule K-1 though? So they receive some special treatment because they’re able to elect a different date for when the gain was recognized. Now, this will happen for any type of partnership. Usually, an LLC could be an S-Corp as well.

The new December 31, 2020 deadline can apply to any gain recognized by the partnership on or after January 1st, 2019. That’s right, all the way back to the beginning of last year. Investors recognizing gain through a partnership schedule K-1 now have until the end of this year to roll over into a qualified opportunity fund. And the reason for this is because normally according to the final regulations we received last December, a taxpayer using gain reported on a schedule K-1 can elect to begin their 180-day period on the due date of the pass through entities tax return, not including extensions. So for the 2019 partnership returns, this due date was March 15, 2020. And the end of the 180-day period that begins on that date, March 15, 2020 plus 180 days is September 11, 2020. So then that date is eligible to get extended until December 31, 2020 under the new notice.

So essentially any gain reported on a partnership schedule K-1, even if the gain was recognized at any point during the 2019 year, you get to recognize it for qualified opportunity zone fund purposes as having been recognized on March 15, 2020, your new deadline is now December 31, 2020. So for either type of taxpayer, really a lot more flexibility and a lot more time now to decide what to do with those gains recognized in the case of the partnership all the way back at the beginning of 2019 in the case of a non-partnership, but just individually recognized gain all the way back until early October of 2019, you now have until the end of this year, the end of 2020 to roll over those gains into an opportunity zone fund.

So what are the consequences of this action that the IRS took to push back this deadline until December 31, 2020? I think there’s two consequences really. One is at the investor level and two is at the fund level from the fund perspective. So I’ll talk about each of those now. So for the investor at the investor level, the investor now has more time to invest into an opportunity zone fund. And what that does is it removes the urgency with which an investor might normally have to roll over gain into an opportunity zone fund, which could be good and bad. It’s a double-edged sword. And that takes me to my second perspective I’d like to study now is from the fund’s perspective, they were probably expecting some different waves of check writing activity over the course of this year.

Certainly some check writing activity, a wave of check writing activity was expected by several fund managers that I spoke with leading up to the previous July 15, 2020 deadline. That deadline now no longer exists. So does that mean that that wave of investment may disappear as well? I think so. I think the urgency just is no longer there. So then there was another wave that I was expecting, which is the wave from 180 days beyond when the stock market selloff occurred back at the, when was it, about the end of February, beginning of March. Huge is how often the stock market, a lot of investors recognizing gain push out 180 days beyond that, I was expecting a surge or a wave of check writing activity to come in, let’s say, the end of August and beginning of September, about 6 months after the stock market selloff, essentially.

Well, that wave has now been postponed as well until the end of the year. A third wave was expected leading up to the September 11, 2020 deadline. That’s for any K-1 partnership gain that may have been recognized by the partnership entity in 2019. The qualified opportunity fund investor was able to open up their window on March 15 of 2020, which makes their deadline September 11, 2020. Well, that deadline no longer applies either. So that wave has also been pushed back until the end of the year.

So that’s 3 separate waves, one on July 15th, one end of August to the beginning of September, and then another one with a hard stop date of September 11, all 3 of those waves have now been pushed back until the end of the year. And what I think we’re gonna see instead of waves of investment through the year, we’re gonna see a tsunami wave of investment the last week of December of 2020. I really think that we’ve just got so many different investors, so many gains that are gonna just get stacked up and backed up until December 31, 2020.

So what does this mean for opportunity zone funds? I think opportunity zone funds are gonna have some serious challenges. They’re gonna face some big headwinds raising capital from now until the end of the year, simply because the urgency is no longer there. Anyone whose window was open on or after April 1, 2020, there is no urgency to invest in an opportunity zone fund now until December 31, 2020. When that period comes, when the end of December comes, I do think there’s gonna be an enormous surge, potentially double, maybe even triple what we would have normally seen at the end of the year.

But until then, you know, we’re not gonna get that surge in mid-July. We’re not gonna get that surge end of August, beginning of September. We’re not gonna get that surge September 11. Everything’s been punted now until December 31. So if you’re an opportunity zone fund and you’re expecting to raise capital this year, you may just have to wait until the end of the year before investors really start getting serious about writing checks because there’s no urgency for them to do so until that final drop dead date of December 31 now.

So as I mentioned at the top of the show, in addition to the 180-day investment requirement that got postponed for qualified opportunity fund investors, there are also four different relief measures provided for qualified opportunity funds and qualified opportunity zone businesses to comply with the regulations and I’ll get to those now. So those 4 different relief measures apply to the 90% investment standard for qualified opportunity funds, that’s number one. Number two, a relief measure for the 30-month substantial improvement period, both for QOFs and QOZBs, number 3, a relief measure for working capital safe harbor. And that’s only for qualified opportunity zone businesses. And finally, 4, a relief measure for the 12-month reinvestment period for qualified opportunity funds.

And I’m gonna go over each of these four fairly briefly. I won’t go into too much detail, but for number 1, the 90% investment standard for qualified opportunity funds, if a qualified opportunity fund’s 90% asset test falls anywhere in the applicable window, and so for this entire notice for all of the stuff, that window is between April 1 and December 31 of 2020, if the fund fails its 90% asset test, it’s deemed to be due to reasonable cost. So there would be no penalty. So when the fund goes to file IRS form 8996, even if they failed the penalty, they can calculate the penalty as just being zero on that penalty line. So this buys the qualified opportunity fund, just that much more time to get in compliance with the 90% test, a lot of relief there for qualified opportunity fund managers.

And the second relief measure applies to the 30-month substantial improvement period for both QOFs and QOZBs. Again, the period between April 1 and December 31, that period is just completely disregarded for the purposes of measuring the 30-month period. So it’s like time stands still between April 1 and December 31. That nine-month period between April and December of this year is just completely disregarded. It’s as though it doesn’t exist for the purposes of measuring the 30-month period. You just go straight from March 31 to January 1st, essentially. And the 9-month period doesn’t exist for the purposes of measuring the 30-month period, measuring the substantial improvement test for QOFs and QOZBs.

The third relief measure that applies at the QOF and QOZB level deals with a relief measure for the working capital safe harbor. And actually this is only for QOZBs. Because President Trump declared the entire nation a disaster area, every opportunity zone now falls within a disaster area. Therefore, any QOZB taking advantage of the working capital safe harbor period, whether it’s 31 months or 62 months, it is automatically extended by an additional 24 months. That essentially means that a QOZB can have a working capital safe harbor period of at least 55 months and up to 86 months, which is an incredibly long amount of time if you think about it, a very long amount of time, a lot of flexibility for these QOZBs, a lot of time for these QOZBs now to deploy their working capital assets.

And finally, the fourth measure that applies at the QOF or QOZB level provides relief for the 12-month reinvestment period for qualified opportunity funds. If a fund’s 12-month reinvestment period includes the date of the Stafford declaration, which was January 20th, 2020, I think Trump made the disaster declaration at some point in March, but he retroactively dated it back to January, he backdated it essentially back to January 20th, if a QOF’s 12-month investment period include that date, then the QOF automatically is granted a 12-month extension, an additional 12 months to invest in qualified opportunity zone property. So just a lot of relief measures here at the QOF and QOZB level, those 4 that I just mentioned covered by this new IRS notice that came out last week, in addition to what I think is the most substantial extension, which is the one that applies to investors’ 180-day windows.

Okay. What did you think? Did I miss anything? If you have any comments or feedback, if you liked the show, or if I missed anything, let me know about it. Send me an email. I can be reached at [email protected]. If you have any thoughts or feedback on anything I discussed on today’s episode, I’d love to hear from you out there.

And additionally, for all of my listeners out there today, I will have show notes on the Opportunity Zones Database website for today’s episode. And you can find those show notes as always at And that’s where you’ll find links to all of the resources that I discussed on today’s show. And I’ll be sure to link to an article that summarizes everything I’ve spoken about today, as well as the full text of both of the recent IRS notices, the one from April 9th, as well as the one from last week on June 4th.

Thanks for listening. We’ll be back soon with another episode.