A second fund that missed the deadline to self-certify as a Qualified Opportunity Fund gets 9100 relief, so its late Form 8996 counts as timely

Plain-English summary

A limited liability company was set up to be a Qualified Opportunity Fund (QOF), the vehicle investors use to defer capital gains by investing them in Opportunity Zones. To become a QOF, an entity self-certifies by filing Form 8996 with its tax return by the return's due date (including extensions). Here the fund's accountant made an administrative error and never filed the extension request (Form 7004), so the return deadline was not pushed back and the Form 8996 was filed late. Once the accountant caught the mistake, the fund filed its return and Form 8996 and asked the IRS for a discretionary extension (9100 relief) to treat the certification as timely. The IRS granted relief. It found the fund acted reasonably and in good faith (it relied on its tax professional, who failed to file the extension) and that granting relief would not prejudice the government. The late Form 8996 is treated as timely, so the fund is a QOF effective from the month it was formed. This is a companion to PLR 202335010, involving what appears to be a related fund with identical facts. The ruling fixes only the timing of the self-certification and expresses no opinion on whether the fund meets the substantive QOF requirements. It matters to Opportunity Zone fund sponsors who miss the self-certification deadline through a preparer's error.

Ruling snapshot

• Question: Should the fund get an extension of time under § 301.9100-3 so its late Form 8996 self-certification as a QOF is treated as timely?
• Outcome: approved (late Form 8996 deemed timely; QOF status effective from formation month)
• Key authorities: IRC § 1400Z-2(d), (e)(4)(A); Treas. Reg. § 1.1400Z2(d)-1(a)(2)(i); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                        Department of the Treasury
                                                                 Washington, DC 20224

 Number: 202335011                                               Third Party Communication: None
 Release Date: 9/1/2023                                          Date of Communication: Not Applicable
 Index Number: 9100.00-00, 1400Z.02-00
                                                                 Person To Contact:
 -------------------------                                       ----------------, ID No. -----------------
 ---------------------------------------                         Telephone Number:
 -----------------------------------------                       --------------------
 ----------------------------------                              Refer Reply To:
                                                                 CC:ITA:B04
                                                                 PLR-123659-22
                                                                 Date:
                                                                 June 05, 2023




 Taxpayer                                    =   ------------------------------------------------------------------
 Tax Director                                =   -------------------
 Accounting Firm                             =   --------------------------
 Date 1                                      =   ------------------
 Date 2                                      =   --------------------------
 Date 3                                      =   --------------------------
 Month 1                                     =   -------------
 Month 2                                     =   --------------------
 Month 3                                     =   -----------------
 Year 1                                      =   -------
 State                                       =   --------------



Dear ------------:

This letter responds to Taxpayer's request, dated Date 3. Specifically, Taxpayer
requests relief, pursuant to sections 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations, for its Form 8996, Qualified Opportunity Fund, filed on Date
2, to be treated as timely for purposes of the election to: (1) self-certify Taxpayer as a
qualified opportunity fund (“QOF”) as defined in section 1400Z-2(d) of the Internal
PLR-123659-22                                2

Revenue Code (Code); and (2) for Taxpayer to be treated as a QOF, effective as of the
month Taxpayer was formed, as provided under section 1400Z-2 of the Code and
section 1.1400Z2(d)-1(a) of the Income Tax Regulations.

                                         FACTS

According to the facts and representations provided, Taxpayer was organized as a
limited liability company on Date 1 under the laws of State and is classified as a
partnership for U.S. federal income tax purposes. Taxpayer was organized for the
purpose of being a qualified opportunity fund and to invest qualified opportunity zone
property.

In Month 2, Tax Director, an authorized representative of Taxpayer, engaged
Accounting Firm to prepare and file Taxpayer’s Year 1 federal income tax return,
including any forms and elections to self-certify Taxpayer as a QOF. Tax Director
communicated Taxpayer’s intention to self-certify as a QOF and provided Accounting
Firm with the necessary information to prepare Form 7004, Application for Automatic
Extension of Time to File Certain Business Income Tax, Information, and Other Returns
to extend the filing deadline for Taxpayer’s Year 1 Form 1065, U.S. Return of
Partnership Income. Due to an administrative error, Accounting Firm failed to prepare
and file Taxpayer’s Form 7004 for Year 1. As a result, Taxpayer’s Form 8996,
Qualified Opportunity Fund to self-certify as a QOF was not filed by the due date of its
federal income tax return for Year 1.

In Month 3, while preparing Taxpayer’s Year 1 tax return, Accounting Firm realized that
it failed to file Taxpayer’s Form 7004 and notified Taxpayer. Taxpayer then asked
Accounting Firm to prepare this request for a private letter ruling. Accounting Firm filed
Taxpayer’s Year 1 Form 1065 and accompanying Form 8996 to self-certify as a QOF on
Date 2.

                                 LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for rules for the
certification of QOFs. Treas. Reg. section 1.1400Z2(d)-1(a)(2)(i) provides that the self-
certification of a QOF must be timely-filed and effectuated annually in such form and
manner as may be prescribed by the Commissioner of Internal Revenue in the IRS
forms or instructions, or in publications or guidance published in the Internal Revenue
Bulletin.

To self-certify as a QOF, a taxpayer must file Form 8996, Qualified Opportunity Fund,
with its tax return for the year to which the certification applies. The Form 8996 must be
filed by the due date of the tax return (including extensions). The information provided
indicates that Taxpayer did not file its Form 8996 by the due date of its income tax
return (including extensions) as a result of Accounting Firm’s administrative error in
PLR-123659-22                                 3

failing to file Taxpayer’s Form 7004 to extend the due date of Taxpayer’s U.S. federal
income tax return for Year 1.

Section 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for electing to be a QOF
and electing to self-certify as a QOF. As such, these elections are regulatory elections,
as defined in section 301.9100-1(b).

Sections 301.9100-1 through 301.9100-3 provide the standards that the Commissioner
will use to determine whether to grant an extension of time to make a regulatory
election.

Section 301.9100-3(a) provides that requests for extensions of time for
regulatory elections (other than automatic extensions covered in section 301.9100-2)
will be granted when the taxpayer provides evidence (including affidavits) to establish
that the taxpayer acted reasonably and in good faith and the grant of relief will not
prejudice the interests of the Government.

Section 301.9100-3(b)(1) provides that a taxpayer is deemed to have acted reasonably
and in good faith if the taxpayer

(i) requests relief before the failure to make the regulatory election is discovered by the
Service;

(ii) failed to make the election because of intervening events beyond the taxpayer's
control;

(iii) failed to make the election because, after exercising reasonable diligence, the
taxpayer was unaware of the necessity for the election;

(iv) reasonably relied on the written advice of the Service; or

(v) reasonably relied on a qualified tax professional, and the professional failed to make,
or advise the taxpayer to make, the election.

In addition, section 301.9100-3(b)(3) provides that a taxpayer is deemed not to have
acted reasonably and in good faith if the taxpayer—

(i) seeks to alter a return position for which an accuracy-related penalty has been or
could be imposed under section 6662 at the time the taxpayer requests relief, and the
new position requires or permits a regulatory election for which relief is requested;

(ii) was fully informed in all material respects of the required election and related tax
consequences but chose not to make the election; or
PLR-123659-22                                  4

(iii) uses hindsight in requesting relief. If specific facts have changed since the original
deadline that make the election advantageous to a taxpayer, the Service will not
ordinarily grant relief.

Section 301.9100-3(c)(1) provides that the Commissioner will grant a reasonable
extension of time to make the regulatory election only when the interests of the
Government will not be prejudiced by the granting of relief. Section 301.9100-3(c)(1)(i)
provides that the interests of the Government are prejudiced if granting relief would
result in a taxpayer having a lower tax liability in the aggregate for all taxable years
affected by the election than the taxpayer would have had if the election had been
timely made (taking into account the time value of money). Section 301.9100-3(c)(1)(ii)
provides that the interests of the government are ordinarily prejudiced if the taxable year
in which the regulatory election should have been made or any taxable year that would
have been affected by the election had it been timely made are closed by the period of
limitations on assessment under section 6501(a) before the taxpayer's receipt of a ruling
granting relief under this section.

                                       CONCLUSION

Based on the facts and information submitted in connection with this request, we
conclude Taxpayer has acted reasonably and in good faith, and that the granting of
relief would not prejudice the interests of the Government.

Accordingly, Taxpayer has satisfied the requirements of the regulations for the granting
of relief, and Taxpayer’s Form 8996 filed on Date 2, shall be considered timely filed.
Accordingly, Taxpayer has thereby made the election under section 1400Z-2 and
section 1.1400Z2(d)-1(a)(2)(i) to self-certify as a QOF as of Month 1. Taxpayer should
submit a copy of this letter ruling to the IRS Service Center where Taxpayer files its
income tax returns, along with a cover letter requesting that the Service associate this
ruling with Taxpayer’s Year 1 federal income tax return.

This ruling is based upon facts and representations submitted by Taxpayer and
accompanied by penalty of perjury statements executed by the appropriate parties.
This office has not verified any of the material submitted in support of the request for a
ruling. However, as part of an examination process, the Service may verify the factual
information, representations, and other data submitted.

This ruling addresses the granting of Treas. Reg. section 301.9100-3 relief as applied to
the election to self-certify Taxpayer as a QOF by filing Form 8996 for Year 1.

Except as expressly provided herein, no opinion is either expressed or implied
concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, we have no opinion, either express or implied,
concerning whether any investments made into Taxpayer are qualifying investments as
defined in Treas. Reg. section 1.1400Z2(a)-1(b)(34) or whether Taxpayer meets the
PLR-123659-22                                 5

requirements and structure under section 1400Z-2 and the regulations thereunder to be
a QOF. In addition, we also express no opinion on whether any interest owned in any
entity by Taxpayer qualifies as qualified opportunity zone property, as defined in section
1400Z-2(d)(2), or whether such entity would be treated as a qualified opportunity zone
business, as defined in section 1400Z-2(d)(3). We express no opinion regarding the tax
treatment of the instant transaction under the provisions of any other sections of the
Code or regulations that may be applicable, or regarding the tax treatment of any
conditions existing at the time of, or effects resulting from, the instant transaction. We
express no opinion as to whether Taxpayer’s Year 1 Federal income tax return is
considered timely filed.

A copy of this letter must be attached to any tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date and control number of the
letter ruling.

This ruling is directed only to the taxpayer requesting it. Code section 6110(k)(3)
provides that it may not be used or cited as precedent. Enclosed is a copy of the letter
ruling showing the deletions proposed to be made when it is disclosed under Code
section 6110.

Pursuant to the Form 2848, Power of Attorney and Declaration of Representation, on
file, we are sending a copy of this letter to Taxpayer's authorized representatives.

This letter is being issued electronically in accordance with Rev. Proc. 2022-1, 2022-1
I.R.B. 1. A paper copy will not be mailed to the taxpayer.



                                       Sincerely,




                                       Mon L. Lam
                                       Senior Counsel, Branch 4
                                       Office of Chief Counsel
                                       (Income Tax & Accounting)


Cc: