Revisions to or Replacements of Working Capital Safe Harbor Plans
Although the final Treasury regulations, Notice 2021-10, and Notice 2020-39 helpfully provide a QOZB with an additional 24 months (on top of the existing 31-month deployment allowance for any single infusion of cash into a QOZB) to expend its working capital assets in light of the COVID-19 pandemic, they do not exempt the QOZB from the requirement that it must do so in a manner substantially consistent with the original, pre-disaster written plan. As we noted
here at the time of the publication of the pandemic relief for QOFs and QOZBs, given that many such vehicles were formed to facilitate investment in business sectors heavily disrupted by the pandemic, the failure to expressly allow written plan revisions to adapt to the effects of the pandemic was a serious hole in the otherwise favorable IRS pandemic guidance for QOFs and QOZBs, and left many advisors hoping that their clients could make such revisions and rely on general regulatory intent to carry the day if questioned on any such changes (or deviations from prior written plans) by the IRS.