OZones During COVID

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In regulations, words matter

With regard to Opportunity Zone regulations in the midst of our nation-wide health emergency, specific language, intended to be instructive and, in my opinion, helpful, can leave lawyers in knots when the text is susceptible to being interpreted in more than one way.

Two of the Federal OZone regulations (Treasury §1.1400Z2(d)-1(d)(3)(v)(D) and §1.1400Z2(f)-1(b)(2)), implemented prior to the arrival of the pandemic, appear to provide additional time for funds and businesses faced with critical deadlines. While the intent of these regulations, as described in Treasury’s comments, is to grant extensions for performance of time-sensitive obligations when delays are “due to a federally declared disaster,” critical sentences depend upon the words “may receive” and “up to.” What exactly do they mean?

Does “may receive” grant permission/authorization automatically? If so, wouldn’t it have been clearer to say “the __ days within which to do xyz has been changed to __ days”? If the point of the regulation is to change a numerical test from one number to another, why not just change the number? Instead, we find ourselves debating whether “may receive” implies that one might (or might not) get extra time, and if that is the correct interpretation, it begs the question of who decides and on what basis.

Similarly, “up to” suggests that the length of the additional time is not a finite number. Does “up to” mean that you can have all of the additional time or only some of it; or that you can have it if you need it; or that you can have it if someone with authority decides you deserve it? Who decides and on what basis?

Most lawyers seem to be advising clients that, while not absolutely clear, the most likely intent is the grant of an extension.

Following release of the regulations, in Notice 2020-23, Treasury addressed, “. . . relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency . . .” While granting certain extensions, Treasury this time stated, “This relief is automatic. Affected taxpayers do not have to call the IRS or file any extension forms or send letters or other documents to receive this relief.”

This is clearer than the regulations. But, at the same time, it leads to more brain cramps, as some lawyers now speculate that the absence of a “relief is automatic” declaration in the previously cited federal regulations could be interpreted to mean that the additional time relief is not automatic.

Hopefully, Treasury will issue clarifying guidance. Deadlines have meanings; missing them has consequences. Words matter!

For over 35 years, John has concentrated his practice in the development of real estate projects. While his clients have come from a broad range of diverse industries, most of John’s day-to-day representation involves housing. John’s clients have built, owned and/or managed hundreds of thousands of multi-family housing units, including housing for the men and women who serve in our armed forces. John has extensive experience in complicated financing structures including syndication of State and Federal Low Income Housing Tax Credits, State and Federal Historic Credits, New Market Tax Credits, Brownfields Credits, energy-related credits and other state credits. Working with owners, lenders investors, industry groups, as well as municipal, state, federal, governmental and regulatory agencies to obtain approvals and support for proposed developments, John’s skills and experience have earned him the reputation as a lawyer who “gets the deal done.” John currently serves on the Board of Directors of Preservation Massachusetts and the National Housing & Rehabilitation Association (NH&RA). He assisted in drafting laws and regulations dealing with affordable housing properties to better facilitate the advancement of his clients’ projects, including the preservation law, enacted in 2009, in the Commonwealth of Massachusetts (Chapter 40T – An Act Preserving Publicly-Assisted Affordable Housing). John continues to serve on the advisory committee which provides advice and recommendations relative to the implementation of Chapter 40T. He also serves, or has served, on the boards of a number of local community banks, hospitals and other social organizations.