On Monday, April 12, 2021, the Internal Revenue Service (IRS) issued a notice of proposed rulemaking to be published in the Federal Register on Wednesday, April 13, 2021 in regard to several Qualified Opportunity Zone (QOZ) incentives. The unpublished proposed regulations provide requirements for certain foreign persons and foreign-owned partnerships investing in Qualified Opportunity Funds (QOF), and provide a 24-month extension to the working capital safe harbor rule for certain QOZ businesses affected by federally declared disasters.
The new rule would allow foreign investors with gains from real estate and certain other business activities in the U.S. to avoid tax withholding when putting those profits into a tax-advantaged Opportunity Fund.
As for the working capital safe harbor, the QOZ regulations currently provide a QOZ business a 31-month safe harbor for treating working capital as “reasonable” for purposes of Section 1397C(e). According to the new rules, if the QOZ business is located in a QOZ that was impacted by a federally declared disaster, the QOZ business may receive up to an additional 24 months to expend its working capital assets.
The rule would allow QOZ Businesses to replace the original designation and written plan and remain eligible for the safe harbor, provided that the remaining working capital assets are expended within the original 31-month period, increased by the 24 additional months provided.
Taxpayers may rely on these changes for taxable years beginning after Dec. 31, 2019.
For more information and to see what an investment in a QOF can do for you, visit PHT Opportunity Fund.