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Feds Deliver CEQA Relief for California OZ Projects

The IRS issued new regulations that add flexibility to the 31-month working capital safe harbor period for delays caused by government agency actions that may include permitting and CEQA reviews. The new rules would apply to operating business investment and real property investment, provided the government action application was completed during the 31-month period.

Opportunity Zone Business investment is expected to accelerate due to clarifications and improvements, and the new regulations are expected to encourage property investment. Following a 60-day public comment period, a public hearing is scheduled for July 9.

Key Treasury provisions include leased property now qualifies as Qualified Opportunity Zone Business Property, which brings additional flexibility for operating businesses. Kosmont Companies writes, in general, leased property does not need to satisfy the “original use” requirement, and is not required to be “substantially improved” by the Opportunity Zone Fund or Opportunity Zone Business.

Kosmont also notes, original use of acquired tangible property commences when property is first placed in service in the Qualified Opportunity Zone. The 31-month working capital safe harbor now applies to both QOZ real estate investments and QOZ business investment, which provides time for the “development of a trade or business” without violating the 90% and 70% testing requirements, according to Kosmont.

If a building has been vacant for at least five continuous years before being purchased by an Opportunity Zone Fund or Opportunity Zone Business, Kosmont indicates the building will not require “substantial improvements” to satisfy the “original use” requirement. Additionally, unimproved land does not need to be “substantially improved,” though the property will not be eligible for OZ Property treatment if the OZ Fund does not intend on improving the land and is simply holding it as an investment.

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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