Opportunity Zone Magazine Volume 1, Issue 3 | Page 7

TREASURY RESPONDS TO THE COVID-19 CRISIS BY OFFERING RELIEF FOR THE OZ INDUSTRY 7 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 OPPORTUNITYZONE.COM