What Happens If You Missed the OZ Reinvestment Deadline

MIAMI—The saying that “timing is everything” has never rang truer than when one is investing in an Opportunity Zone fund. Beginning with the date of your sale, the clock starts ticking on the 180-calendar-day window to invest before triggering a gain.

If you happen to have a gain recognized for federal tax purposes on Dec. 31, 2018, your reinvestment should have happened no later than June 28, 2019. Before this date, investors were able to reduce tax liability on realized capital gains from 2018 by investing those profits into a Qualified Opportunity Fund. These funds would then invest in businesses or properties located within Opportunity Zones. For investors facing a stiff tax burden from capital gains in 2018, this was the time to potentially reduce their tax liability.

Some high net worth investors and family businesses opted to invest in single opportunities since they have a lower overhead than a commingled fund and may coexist with current operating companies or investments. However, in order to participate in these deals, investors needed to have set up a private Qualified Opportunity Zone fund before that June 28th deadline.

“You have to make sure that your service providers such as your legal counsel, CPA, etc. are up to date with the program and stay within compliance, otherwise it can blow up in your face,” Robert Matt, senior tax manager with Kaufman Rossin, tells GlobeSt.com.

Investors who missed the June 28th deadline will have another chance to invest in Opportunity Zones but they must wait until the next reinvestment period in order to participate.

There are various reasons why investors missed this all-important deadline, Matt says.

1. They didn’t identify an OZ investment,
2. They may have not had a capital gains transaction, and
3. Some funds are awaiting clarifications on some of the OZ guidelines.

“It’s important to keep your eye on your OZ investments,” says Matt. “This program doesn’t necessarily make a bad deal a good deal.”