Not the way I remember it; the extension on the 90% test is only through June 30, 2021.
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What does the extended relief in Notice 2021-10 mean when it comes to the 90% test and reasonable cause relief?
Could it be interpreted to mean it is available to a QOF for calendar year 2021 if the QOF fails its Dec. 31, 2021 test?
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The IRS Notice 2021-10 disregards any failure by a QOF to satisfy the 90% investment standard for any tax year if either (i) the last day of the first 6-month period of the tax year, or (ii) the last day of the tax year, falls within the period beginning on April 1, 2020, and ending on June 30, 2021. Under a literal reading, this notice can absolve the failure by a calendar-year QOF to meet the 90% test on Dec. 31, 2021, even though this date occurs after the April 1, 2020-June 30, 2021 relief period. This is because the last day of the first 6 months of 2021 occurs on June 30, 2021 and, therefore, 2021 is described in clause (i). At first sight, this interpretation appears to be unintended. But keep in mind that the 90% test is an annual test -- under Code Section 1400Z-2(d)(1), QOFs measure their assets by taking the average of the percentage on the two testing dates. A "failure" for purposes of the reasonable cause provision (Code Section 1400Z-2(f)(3)) occurs if the annual average is not met (but not necessarily if the test is missed on only one of the two dates). Consider a QOF that, in a normal year, has "good" assets accounting for 95% of its assets on June 30 but only 87% on Dec. 31. In this case, its average percentage would be 91% and it would meet the test. But if COVID causes the QOF to miss the June 30 test, then the notice wouldn't provide sufficient relief if it excluded the June 30 test and based the annual average solely on the Dec. 31 test.
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