When it comes to assets, when can a QOZB be treated as the “original user” and the acquired assets treated as QOZBP?

Answers

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  Valerie Grunduski

  Plante & Moran, PLLC

  January 24, 2020

  Qualified property must be either originally used or substantially improved to meet the 90% (at QOF level) or 70% (at QOZB level) tests. When a QOZB is used, the requirement for original use or substantial improvement must be met by the QOZ business. The final regulations solidify that land can more easily meet the original use test with limited improvements, that leased property is exempt from the original use/substantial improvement tests, and that there are various aggregation concepts that can be deployed when analyzing original use/substantial rehab amongst a similar category of business assets.

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  Jonathan McGuire

  Aldrich CPAs and Advisors

  January 15, 2020

  OZ property is deemed business property if it is acquired after Dec. 31, 2017, is placed and used for depreciation purposes in a zone, and either has original use in the zone or be substantially improved. To further answer your question on original use, this begins when the assets would first be placed and utilized in a zone for tax depreciation. Therefore, new or used assets may be qualified property if there has never been a depreciation of the asset inside the confines of a designated zone. Additionally, vacant property, which has less than 20% utilization by square footage, in general, has a three year lookback period to deem its original use or not. If the property was deemed vacant for the last three consecutive years prior to asset acquisition, it would have original use.

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  Maria De Los Angeles Rivera

  Kevane Grant Thornton

  February 01, 2020

  Only original use property acquired after Dec. 31, 2017 qualifies as Opportunity Zone business property. If not, the property must be substantially improved within 30 months of acquisition.

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