On April 9, 2020, the Internal Revenue Service (IRS) released Notice 2020-23 which provides additional relief to taxpayers affected by the 2019 novel coronavirus disease (COVID-19). For affected taxpayers with a time-sensitive action that is due to be performed on or after April 1, 2020 and before July 15, 2020, the deadline is postponed until July 15, 2020.

The IRS issued Notice 2020-23 pursuant to its authority under Section 7508A(a) of the Internal Revenue Code to expand relief provided to affected taxpayers. Affected taxpayers include any:

For deadlines occurring during this time period, Notice 2020-23 postpones the deadline until July 15, 2020. This relief is automatic. Affected taxpayers do not have to call the IRS or file any extension forms or other documentation to request this relief. For more information on Notice 2020-23, see IRS: News Releases: IR-2020-66.

Time-sensitive actions include like-kind exchanges of real estate under Section 1031 of the Internal Revenue Code (26 C.F.R. § 301.7508A-1(c)(1)(vii); Rev. Proc. 2018-58, 2018-50 I.R.B. 990). In a like-kind exchange, an owner can defer recognition of capital gains on the sale of real estate by investing the proceeds into replacement property.

Taxpayers involved in a 1031 like-kind exchange during the COVID-19 pandemic may have difficulty complying with the strict statutory deadlines for:

Under Notice 2020-23, if the last day of the 45-day identification period or the 180-day exchange period falls on or after April 1, 2020 and before July 15, 2020, the deadline is postponed until July 15, 2020.

For purposes of Notice 2020-23, time-sensitive actions also include certain investments under the Qualified Opportunity Zone (QOZ) program (26 U.S.C. §§ 1400Z-1 and 1400Z-2). Under this program, an investor can temporarily defer recognition of capital gains from the sale or exchange of capital assets by reinvesting the amount of gain into a Qualified Opportunity Fund (QOF) within 180 days of the sale or exchange.

Under Notice 2020-23, if a taxpayer's 180-day period to invest gain into a QOF expires on or after April 1, 2020 and before July 15, 2020, the deadline is postponed until July 15, 2020.

Counsel for taxpayers currently involved in 1031 like-kind exchanges or investments in QOZs should determine whether the extensions under Notice 2020-23 apply to their specific transaction. Many individuals and businesses are facing financial hardship due to the COVID-19 pandemic and could benefit from this additional time. While this relief is automatic, counsel should:

For more information on 1031 like-kind exchanges of real estate, see 1031 Like-Kind Exchange of Real Estate Toolkit.

For more information on investments in QOZs, see Practice Note, Qualified Opportunity Zone Investments: Overview and Qualified Opportunity Zone Investments Flowchart and Timeline.