COVID Relief for QOFs and QOZBs


The IRS has granted additional relief to Opportunity Zone Funds and their investors, under IRS Revenue Procedure 2020-34 (the Revenue Procedure). This new relief is much more generous than what had been previously granted. It should now be much easier for investors to deploy their capital gains into opportunity zones and for OZ funds to comply with the safe harbor rules. The main benefits to QOFs and QOZBs include:

Extension of the 180 Day Investment Period

Investors have a 180-day period in which to invest in an Opportunity Zone Fund (QOF). Under the Revenue Procedure, if that 180-day period would ordinarily end after March 31, 2020, the period may be extended until December 31, 2020. (Prior relief extended this period only until July 15, 2020.)


If you had capital gains in the 180 days prior to March 31st of 2020, you now have until the end of 2020 to deploy those gains into an OZ Fund or OZ Business. While this is a useful addition to the program, it doesn’t impact any of our current investors. However, it does allow Liquid to take on new investment capital between now and the end of the year from a previously un-serviceable investor group.

OZ Penalties Generally InApplicable for 2020

An Opportunity Zone Fund must generally satisfy various criteria, and these criteria are evaluated on two testing dates each year. If these criteria are not satisfied, special Opportunity Zone penalties may be imposed on the Fund. Under the Revenue Procedure, however, these penalties will generally not be imposed with respect to the 2020 tax year.


None to speak of for Liquid QOF I. We are safely within all the limits of the code and did not expect to have any issues with penalties in 2020.

Extension of Work Capital Exemptions

A QOZB generally has a 31-month safe harbor for holding working capital int eh form of cash and cash equivalents. Regulations allow for a 24-month extension when the business is located within a Federally declared disaster [area]. The Revenue Procedure confirms that this 24-month extension is available for any working capital held before Dec 31, 2020.

In addition, the working capital safe harbor (as well as associated safe harbors for, e.g., tangible property) may be availed of more than once, subject to a 62-month limitation. The Revenue Procedure provides that this 62-month limitation may also be extended by 24 months as a result of the COVID-19 disaster.


This is a very useful addition for Liquid. It will allow us 24-month longer window to identify properties and create plans for their development. Given the historical performance of our cash and cash equivalents, this additional time will be incredibly valuable.

Extended Period of Substantially Improving Property

One way for an Opportunity Zone Fund to qualify as such is to “substantially improve” its tangible property, and property is “substantially improved” if the basis of the property is doubled within a 30-month period as a result of improvements that are made to the property. For example, if an Opportunity Zone Fund pays $1M to acquire a building and spends another $1M to improve the building within a 30-month period, the building will be substantially improved.


The Revenue Procedure extends this 30-month substantial improvement period. As a result of COVID-19, the period from April 1, 2020, through December 31, 2020, may be disregarded, which may give an QOF or QOZB an additional nine months to double its basis in its property. Liquid is not substantially impacted by this provision, however we do appreciate the IRS’ effort to assist other OZ Funds and QOZBs.

Extended Reinvestment Period

At least 90% of an Opportunity Zone Fund’s assets must be “qualified opportunity zone property” (QOZP), which does not include cash. However, if an Opportunity Zone Fund receives proceeds from QOZP, the proceeds may be treated as QOZP if they are reinvested within 12 months and certain other conditions are satisfied. Regulations allow for a 12-month extension when the reinvestment is delayed due to a Federally declared disaster, provided that the proceeds are invested in the manner that was intended before the disaster.

The Revenue Procedure provides that this 12-month extension may be available if the fund’s reinvestment period includes January 20, 2020.


If and when the Liquid QOZB I has income, that income will be re-invested into the fund immediately. Extension of the reinvestment period is useful but not critical to our business.

Final Thoughts

In the coming weeks, Liquid will be issuing an annual report for the year 2020. Thereafter, we will be releasing a detailed acquisition plan for our Austin-based OZ Fund. Please download our investor prospectus for more details or review our FAQs to clarify what an OZ Fund is an how Liquid qualifies.

Investor Prospectus