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How can I get an extension to the 30-month period after the acquisition of a property to make improvements?

Is there any way to get an extension to this 30-month rule? What happens if don’t make the deadline? Is there a penalty?

  • Peter McNeil
    September 18, 2019

    You can get an extension for delays in government approvals of project. Otherwise, the penalty is 5% a year for the shortfall in qualified tangible property. If the 90% test fails, the penalty under IRC section 6621(a) (2) is 3%, plus fed short term rate. Currently the rate is 5% a year. 90% of assets less qualified assets times the 6621 rate.

  • Matthew Rappaport
    September 08, 2019

    There's no mechanism in the proposed regulations to apply for an extension. Instead, the proposed regulations specify the 30-month period is tolled for any general circumstances outside the taxpayer's control, such as government delays in permit applications or any delays caused by a third-party lender. The government is unlikely to put forth any extensions for circumstances within a taxpayer's control. If the taxpayer holds working capital or non-QOZBP outside the respective safe harbors for those, the assets would be "bad assets" under the 90% test and risk statutory penalties or even decertification if the problem is not remedied soon enough.

  • Maria De Los Angeles Rivera
    September 07, 2019

    The regulations provide the possibility of extension for the 31-month working capital safe harbor, but not for the 30-month period for substantial improvement. Non-compliance will disqualify the property as QOZBP and require the QOF to compute the related penalties if the noncompliance produce is not compliant with the 90% test for the QOF.

  • Jonathan McGuire
    September 06, 2019

    There is no extension except for when a delay is caused due to government action, such as the permitting process or an EPA study.

  • Matt Campbell
    September 06, 2019

    If there is a delay due to government issues, that can extend the 30 months. Carefully document any government delay, including for zoning or permitting.


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