I know there needs to be a written plan showing that capital was held for making improvements to tangible QOZ property. Are there rules for how that plan should be set out?
The IRS hasn't issued a specific form or template for the working capital safe harbor, though the most recent round of proposed regulations provides several examples of acceptable uses of the safe harbor. I'd recommend reviewing those examples and structuring your plan with sufficient detail, including timelines, projected expenditures, and progress milestones, to ensure you can demonstrate you "substantially complied" with the plan.
No, there are not specific rules for how the plan should be laid out. But I would think in terms of a professional comprehensive plan with a reasonable amount of detail, benchmarks, timeline, etc. In other words, it should like a real plan that can be followed and executed by your management team in the outlined time frame. There is no format requirement.
While I want to answer your question, all situations are different and require considering the facts.
In answer to your question, there are no specific rules, but a written, itemized description of how the money will be/was used and an estimated timetable for making the expenditures should be sufficient.
There aren’t any specific rules, but there's specific information that must be included, namely, timelines for deploying capital, intended uses of capital, and the amount of capital being devoted to each intended use. You'll need to substantially comply with the plan and schedule, so be sure you're putting together a plan that you and your business can actually follow unless circumstances arise that are outside your control.
There are no specific rules as to how the plan has to be laid out, but based on discussions I have had with Treasury it should contain all of the information that is customary in an investment approval package. It should be as if the business plan is a business proposal from the QOZB to the QOF.
Not really. Just that you can deploy the money within 30 months.
No definite rules there yet. I'd get something in place that corresponds to what a large construction project would require as far as timelines/budgets, etc. The development expenditures should have some linkage to the plan and be deployed according to plan with some variance.
The regulations have not provided detailed guidelines for what needs to be in the business plan, but we recommend that the business plan be robust and include financial projections, including cash flow projections to support the working capital safe harbor. Ideally you will involve a firm or person with experience preparing business plans and financial models to increase credibility. You might want to start with your local universities if you don't have these resources.
There isn't much in the way of rules here. Indeed, the community doesn't really know if the plan has to be specific to a particular project. The regulations simply say the following: [To satisfy the safe harbor] "all of the following three requirements are satisfied: (A) Designated in writing. These [working capital assets] are designated in writing for the acquisition, construction, and/or substantial improvement of tangible property in a qualified opportunity zone, as defined in section 1400Z–1(a). (B) Reasonable written schedule. There is a written schedule consistent with the ordinary start-up of a trade or business for the expenditure of the working capital assets. Under the schedule, the working capital assets must be spent within 31 months of the receipt by the business of the assets. (C) Property consumption consistent. The working capital assets are actually used in a manner that is substantially consistent with paragraph (d)(5)(iv)(A) and (B) of this section." Consistent with the foregoing, I'd pick out a property and do a rough out of what I plan to do to it, how I will pay for it, when I need the money, and how much. Then, I'd do a spreadsheet with several columns. The first would be the title of the particular activity (negotiate acquisition documents, seek bank financing, acquire the property, get permits, pour the foundation, install the plumbing, etc.). The second might have identifying information, like the architects, banks, builders, etc., that I plan to contact (or who they are if they are already arranged). Next would be the start and end date for the particular activity, and finally we'd have the amount to be spent on the activity. If it was going to be over an extended period, I'd probably have several lines with estimates of the amounts to be spent as they come along. If I don't have all the money at the start of the transaction, I'd include lines for when and how I will get additional funds. Finally, I'd review it with the people who are going to do the particular activities to establish that it is reasonable (remember, reasonableness is one of the requirements!), and that the funds are sufficient, or can be obtained, and that they can be spent in accordance with the timetable. Now, I want you to note that this is simply my recommendation. Plainly, the more you have, the less likely that the IRS will challenge that you have a written plan. Still, I could imagine a skimpier plan if that's what you have. And I could imagine a plan that identifies a few properties, or even a kind of property, and says that you will buy one or more of them, although I have a strong preference for identifying a particular property and project. I'll also note that there are some more conservative advisors who think that you have to have all of the money in advance, although I have discussed this with IRS and Treasury officials, and I think that reasonably expecting to get the money should work.
The regulations do not provide template or examples. I will recommend to include as much details as possible regarding the timeline and requirements for the project.
The treasury regulations published on May 1 provide two examples of what the IRS expects to be in the written plan that complies with the working capital safe harbor. Per the proposed Treasury regulations, the written plan should include a schedule for the use of the capital for the development of a trade or business in a QOZ within 31 months of receipt, including when appropriate, the acquisition, construction, and/or substantial improvement in a QOZ. The second example in the proposed regulations contemplates a second written plan when additional capital was contributed. Note that the working capital assets should also be actually expended a manner substantially consistent with the plan and schedule.
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