This guide covers everything accredited investors need to know about covid relief for qofs and qozbs—from Austin market context and tax considerations to due diligence questions and next steps with Liquid's Opportunity Zone funds, bonds, and development projects.
The IRS has granted additional relief to Opportunity Zone Funds and their investors, under IRS Revenue Procedure 2020-34 (the Revenue Procedure). This new relief is much more generous than what had been previously granted. It should now be much easier for investors to deploy their capital gains into opportunity zones and for OZ funds to comply with the safe harbor rules. The main benefits to QOFs and QOZBs include:
Extension of the 180 Day Investment Period
Investors have a 180-day period in which to invest in an Opportunity Zone Fund (QOF). Under the Revenue Procedure, if that 180-day period would ordinarily end after March 31, 2020, the period may be extended until December 31, 2020. (Prior relief extended this period only until July 15, 2020.)
Implications
If you had capital gains in the 180 days prior to March 31st of 2020, you now have until the end of 2020 to deploy those gains into an OZ Fund or OZ Business. While this is a useful addition to the program, it doesn’t impact any of our current investors. However, it does allow Liquid to take on new investment capital between now and the end of the year from a previously un-serviceable investor group.
OZ Penalties Generally InApplicable for 2020
An Opportunity Zone Fund must generally satisfy various criteria, and these criteria are evaluated on two testing dates each year. If these criteria are not satisfied, special Opportunity Zone penalties may be imposed on the Fund. Under the Revenue Procedure, however, these penalties will generally not be imposed with respect to the 2020 tax year.
IMPLICATIONS
None to speak of for Liquid QOF I. We are safely within all the limits of the code and did not expect to have any issues with penalties in 2020.
Extension of Work Capital Exemptions
A QOZB generally has a 31-month safe harbor for holding working capital int eh form of cash and cash equivalents. Regulations allow for a 24-month extension when the business is located within a Federally declared disaster [area]. The Revenue Procedure confirms that this 24-month extension is available for any working capital held before Dec 31, 2020.
In addition, the working capital safe harbor (as well as associated safe harbors for, e.g., tangible property) may be availed of more than once, subject to a 62-month limitation. The Revenue Procedure provides that this 62-month limitation may also be extended by 24 months as a result of the COVID-19 disaster.
IMPLICATIONS
This is a very useful addition for Liquid. It will allow us 24-month longer window to identify properties and create plans for their development. Given the historical performance of our cash and cash equivalents, this additional time will be incredibly valuable.
Extended Period of Substantially Improving Property
One way for an Opportunity Zone Fund to qualify as such is to “substantially improve” its tangible property, and property is “substantially improved” if the basis of the property is doubled within a 30-month period as a result of improvements that are made to the property. For example, if an Opportunity Zone Fund pays $1M to acquire a building and spends another $1M to improve the building within a 30-month period, the building will be substantially improved.
IMPLICATIONS
The Revenue Procedure extends this 30-month substantial improvement period. As a result of COVID-19, the period from April 1, 2020, through December 31, 2020, may be disregarded, which may give an QOF or QOZB an additional nine months to double its basis in its property. Liquid is not substantially impacted by this provision, however we do appreciate the IRS’ effort to assist other OZ Funds and QOZBs.
Extended Reinvestment Period
At least 90% of an Opportunity Zone Fund’s assets must be “qualified opportunity zone property” (QOZP), which does not include cash. However, if an Opportunity Zone Fund receives proceeds from QOZP, the proceeds may be treated as QOZP if they are reinvested within 12 months and certain other conditions are satisfied. Regulations allow for a 12-month extension when the reinvestment is delayed due to a Federally declared disaster, provided that the proceeds are invested in the manner that was intended before the disaster.
The Revenue Procedure provides that this 12-month extension may be available if the fund’s reinvestment period includes January 20, 2020.
IMPLICATIONS
If and when the Liquid QOZB I has income, that income will be re-invested into the fund immediately. Extension of the reinvestment period is useful but not critical to our business.
Final Thoughts
In the coming weeks, Liquid will be issuing an annual report for the year 2020. Thereafter, we will be releasing a detailed acquisition plan for our Austin-based OZ Fund. Please download our investor prospectus for more details or review our FAQs to clarify what an OZ Fund is an how Liquid qualifies.
Executive Summary: COVID Relief For QOFs And QOZBs
How does the IRS guidance on Covid relief impact opportunity zone investors and the Funds / Business they invest in? For accredited investors weighing Austin real estate, federal tax incentives, and fixed-income alternatives, understanding covid relief for qofs and qozbs is a practical first step before reviewing fund materials or offering documents.
Liquid's team publishes research and project updates so investors can connect macro trends—population growth, housing supply, IRS guidance, and local entitlement reform—to specific decisions about capital gains reinvestment, bond allocations, and Opportunity Zone fund commitments.
Market Context in Austin, Texas
Austin remains one of the most closely watched U.S. housing markets. After rapid appreciation in 2020–2022, buyers and developers adjusted to higher interest rates, normalized inventory, and selective rent growth. Opportunity Zone tracts east of Interstate 35 continue to see infill activity because land costs, renter demographics, and corridor access support value-add and ground-up residential strategies.
For investors, Austin's appeal is not only price appreciation but also employment diversification, migration inflows, and policy debates over density and affordability. City Council initiatives—bonus density programs, infill tools, and changes to review processes—directly affect project timelines in OZ neighborhoods where Liquid operates.
Neighborhoods such as Parker Lane, Montopolis, East Oltorf, and Windsor Park offer contrasts in age of housing stock, ownership rates, and proximity to employment centers. Underwriting therefore requires tract-level analysis rather than MSA-wide averages alone.
Deep Dive: COVID Relief For QOFs And QOZBs
When evaluating covid relief for qofs and qozbs, start with the investor problem being solved: deferring or reducing capital gains tax, earning current income, gaining exposure to Austin residential real estate, or diversifying beyond public markets. Each objective implies different liquidity, hold period, and documentation requirements.
Qualified Opportunity Funds must meet IRS asset tests and follow rules for qualified Opportunity Zone property and businesses. Sponsors should demonstrate not only tax compliance but also construction competency, capital stack discipline, and transparent reporting. Liquid's model emphasizes Austin infill and rental stabilization in designated tracts, with regular news updates on entitlements and capital raises.
If your question is specifically about covid relief for qofs and qozbs, map how it affects timing (180-day reinvestment windows, 45-day 1031 identification), risk (development, lease-up, interest rate sensitivity), and exit (1031 continuation, QOF 10-year exclusion, or note maturity). Professional tax and legal counsel should validate any strategy against your facts.
Tax and Structuring Considerations
Opportunity Zone benefits include temporary deferral of eligible gains, potential reduction of deferred gains with long enough holds, and possible exclusion of new QOF investment appreciation after 10 years. These benefits interact with federal deadlines—notably the deferral recognition date—and individual state tax treatment, which may differ from federal rules.
Investors comparing 1031 exchanges should note like-kind real property requirements, equal-or-greater debt replacement constraints, and the inability to defer non-real-estate gains. Opportunity Zone investing accepts a broader range of capital gains sources but requires equity investment in a QOF rather than direct property replacement.
Bond investors evaluating zero coupon structures should model returns on a yield-to-maturity basis, understand how private offerings differ from FDIC-insured deposits, and confirm accredited investor eligibility. Offering documents describe use of proceeds, collateral or security features if any, and payment timing.
Due Diligence Checklist
Request and read the PPM, subscription agreement, and any supplements. Verify sponsor track record on entitlements, budgets, and investor communications. For development-heavy strategies, inspect site control, plan status with the City of Austin, and realistic construction timelines.
Stress-test assumptions: rent comps, exit cap rates, hard cost inflation, and lease-up pace. For tax-driven strategies, model both federal and state outcomes and identify key dates that trigger recognition events.
Ask how reporting works—annual K-1s, project newsletters, audited financials if available—and whether the strategy matches your liquidity profile. Liquid encourages direct conversations for investors comparing bonds, QOF II equity, or hybrid allocations.
Looking Ahead
The themes behind covid relief for qofs and qozbs will continue to evolve with IRS guidance, Austin land development code updates, and capital market conditions. Investors who stay informed through primary sources—IRS FAQs, City of Austin Development Services, Census demographics—and sponsor updates are better positioned to act within critical deadlines.
Liquid will continue publishing news on projects, policy changes, and educational topics so investors can connect portfolio decisions to local market reality. Whether you are exploring your first QOF investment or comparing bond yields to savings accounts, start with education, validate with professionals, and invest only when documents and risk tolerance align.
| Holding Period | Tax Benefit | Investor Impact |
|---|---|---|
| Less than 5 years | Deferred gain due at sale or 2026 | Capital gains tax deferred until earlier of disposition or Dec. 31, 2026 |
| 5 years | 10% basis step-up on deferred gain | Reduces taxable portion of original capital gain |
| 7 years | 15% basis step-up on deferred gain | Additional reduction before deferral deadline |
| 10+ years | Exclusion of new OZ investment gains | Appreciation in the QOF investment may be tax-free if held 10 years |
Related Resources on Liquid
Further Reading
Frequently Asked Questions
- What is COVID Relief For QOFs And QOZBs and why should investors care?
- COVID Relief For QOFs And QOZBs sits at the intersection of Austin real estate, federal tax policy, and long-term wealth building. Investors evaluating this topic typically want clarity on how it affects capital gains treatment, project timelines, neighborhood fundamentals, or fund structure. Liquid publishes educational content so accredited investors can compare strategies before reviewing offering documents with their advisors.
- How does this relate to Opportunity Zone investing in Austin?
- Austin's designated Opportunity Zones span neighborhoods east and southeast of downtown where housing demand, job growth, and infill development continue to attract capital. Liquid focuses on single-family and small multifamily projects in tracts including Parker Lane and Montopolis, combining local entitlement expertise with QOF compliance so investments may qualify for deferral, reduction, and exclusion of eligible gains when holding requirements are met.
- Who is the typical Liquid investor for this topic?
- Liquid investors are typically accredited individuals who recently realized capital gains from business sales, real estate dispositions, stock positions, or other appreciated assets. They seek tax-efficient deployment into tangible Austin real estate rather than passive index exposure alone. Some investors prioritize fixed-income style returns through zero coupon notes; others prioritize equity-style appreciation through QOF investments.
- What should I review before investing with Liquid?
- Review the Private Placement Memorandum, subscription agreement, and fund-specific materials for any offering you consider. Confirm your accredited investor status, understand liquidity terms, and discuss tax implications with a CPA or tax attorney. Liquid's team is available to answer process questions, but individualized tax or legal advice should come from your professionals.
- Where can I learn more about Liquid's funds and projects?
- Start with the funds page for QOF II overview materials, the bonds page for zero coupon note terms, and the projects page for active development updates. The Austin Opportunity Zone map shows tract boundaries. You may also contact Liquid directly through the investor inquiry form to discuss fit and next steps.