Several factors need to be addressed in the qualification process.
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What requirements have to be met to qualify for the Working Capital Safe Harbor under the final Opportunity Zone regulations?
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Working capital held in cash, cash equivalents or debt instruments less than 18-months are not included in the non-qualified financial property 5% test if they are deemed to be reasonable working capital. This requires that they be designated in writing for the acquisition, construction or substantial improvement of property in the zone, including a written schedule for the expenditure of these assets and provided that they are generally spent within 31 months of receipt. There are available extensions for federal disasters, including COVID of up to 24 months and exceptions for delays due to a government action. Importantly, this safe harbor is only available for QOZBs and not QOFs.
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