How do I prove that my building has been vacant for five years prior to being purchased by a QOF or QOZ business? Will the purchased building satisfy the “original use” requirement without the need for “substantially improving” the property?
The simplest way to prove would be to get a letter from the local electrical utility company that they had no electric service or nominal for security or lighting for a period of five years or more. The city or county would also likely be on a position to produce such a letter.
Leases, utility, be creative. It also depends on a few other factors.
You make that claim/assertion. If audited, you need to show that you did not make any money off it in the specified period.
There is not usually a mechanism to identify when a "vacancy" begins from tax or public records. Many vacant properties later become abandoned properties, and this often occurs when the city does a tax taking of the property for non-payment of taxes. However, that does not inform the date on which the property became vacant. The owner/landlord may well be able to provide and document information regarding when vacancy began, assuming the owner has not abandoned the property. Obviously, dates on which lease payments stopped is useful, but occupancy may have continued after payment stopped. There may also be an action for eviction. It will obviously vary from property to property.
You can't prove a negative. So you need to make sure there is not evidence that can prove the building was occupied or had a productive use. Be sure there are no permits or licenses indicating use. Be sure there is no rental or business income on tax returns for the use of the building. Try to show documentation of regular inspections checking on squatters.
In order to prove that the property was not occupied and generating rental income, it would be beneficial to obtain the financial statements and tax returns of the owner of the vacant property. It would also be helpful if there is evidence that the property was condemned by a local municipality. If the building was in fact vacant for the previous five years, then the purchased building should satisfy the “original use” requirement without the need for “substantially improving” the property.
The regulations do not provide specifics about how to prove a five-year vacancy, but I would look up any history of certificate of occupancy available with the local building department if it's available. Providing the CO history ought to be enough. Regarding the original use requirement, if you can prove five-year vacancy, you would have no need to prove substantial improvement because the statutory requirement is either/or (original use OR substantial improvement).
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