Late opportunity fund self-certification permitted

Plain-English summary

A partnership was organized to operate as a qualified opportunity fund and invest in qualified opportunity zone property. It later sought advice about completed transactions and learned that it had failed to attach Form 8996 to its first-year partnership return because it did not know about the filing requirement. The partnership promptly requested regulatory-election relief. The IRS found reasonable action, good faith, and no prejudice to the government, and granted 60 days to attach Form 8996 to the affected year's return. The ruling extends only the Form 8996 deadline, not the deadline for Form 1065, and does not decide whether the fund or its investments otherwise satisfy the opportunity-zone rules.

Ruling snapshot

• Question: Could a partnership make a late QOF self-certification after being unaware of the Form 8996 requirement?
• Outcome: Approved, with 60 days to file Form 8996
• Key authorities: IRC § 1400Z-2; Treas. Reg. §§ 1.1400Z2(d)-1, 301.9100-1, 301.9100-3

Full text (IRS public release)

    Internal Revenue Service                                Department of the Treasury
                                                            Washington, DC 20224

    Number: 202344006                                       Third Party Communication: None
    Release Date: 11/3/2023                                 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-102904-23
                                                            Date:
                                                            August 09, 2023




Re:       ------------------------
--------------------------------


    Taxpayer                         =   --------------------------------------------------

    State                            =   -------------

    Date 1                           =   --------------------------

    Date 2                           =   --------------------------

    Date 3                           =   ---------------------

    Year 1                           =   -------




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

This responds to Taxpayer’s request dated Date 1, seeking relief to make a late
regulatory election pursuant to §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations. 1 Specifically, Taxpayer requests an extension of time to file


1
 Unless otherwise specified, all “section” references are to sections of the Internal Revenue Code of
1986, as amended, 26 U.S.C. (Code), or the income Tax Regulations or Procedure and Administration
Regulations, 26 C.F.R. pt. 1 or 26 C.F.R. pt. 301.

PLR-102904-23                                 2

Form 8996, Qualified Opportunity Fund, to (1) self-certify Taxpayer as a Qualified
Opportunity Fund (QOF) as defined in § 1400Z-2(d) of the Code; and (2) be treated as a
QOF, effective as of the month Taxpayer was formed, as provided under § 1400Z-2 of
the Code and § 1.1400Z2(d)-1(a) of the Income Tax Regulations.

                                          FACTS

According to the representations and information provided, Taxpayer was organized as
a limited liability company on Date 2 under the laws of State and is classified as a
partnership for federal income tax purposes. Taxpayer was organized for the purpose of
being a QOF and to invest in qualified opportunity zone property.

On Date 3, Taxpayer sought advice relating to some of Taxpayer’s completed
transactions. Taxpayer subsequently determined that it failed to file the required Form
8996 with Taxpayer’s income tax return for Year 1 because Taxpayer was unaware of
the filing obligation. Upon discovering the failure to timely file Form 8996 with
Taxpayer’s income tax return for Year 1, Taxpayer submitted this ruling request.

                                  LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for rules for the
certification of QOFs. 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 Internal Revenue Service
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 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 Year 1 income tax return because it was
unaware of the Form 8996 filing obligation.

As § 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for an entity to self-certify
as a QOF, these elections are regulatory elections, as defined in § 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 changes covered in § 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 granting relief will not prejudice the interests of the
Government.

PLR-102904-23                                 3


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, § 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

       (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.

PLR-102904-23                                 4


                                      CONCLUSION

Based on the information submitted and the representations made, we conclude that
Taxpayer has acted reasonably and in good faith, and that the granting of relief would
not prejudice the interests of the government. Accordingly, based solely on the
information submitted and the representations made in the ruling request, we grant
Taxpayer an extension of 60 days from the date of this letter ruling to file a Form 8996
to make the election to self-certify as a QOF under § 1400Z-2 of the Code and
§ 1.1400Z2(d)-1(a)(2)(i). The election must be made on a completed Form 8996
attached to Taxpayer’s income tax return for Year 1. This letter ruling grants an
extension of time to file a Form 8996. This letter ruling does not grant an extension of
time to file Taxpayer’s Form 1065.

                                         CAVEATS

This ruling is based upon the representations made and information submitted by
Taxpayer and accompanied by a penalty of perjury statement executed by an
appropriate party. 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 information, representations, and other data submitted.

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

Except as expressly provided herein, no opinion is 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
§ 1.1400Z2(a)-1(b)(34) or whether Taxpayer meets the requirements under § 1400Z-2
of the Code and the regulations thereunder to be a QOF. In addition, we express no
opinion on whether any interest owned in any entity by Taxpayer qualifies as qualified
opportunity zone property, as defined in § 1400Z-2(d)(2), or whether such entity would
be treated as a qualified opportunity zone business, as defined in § 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.

PLR-102904-23                                  5

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with the power of attorney on file with this office, a copy of this letter is
being sent to Taxpayer’s authorized representative.

This letter ruling 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 Taxpayer.


                                           Sincerely,




                                           Lisa Mojiri-Azad
                                           Senior Technician Reviewer
                                           Branch 4
                                           Office of Associate Chief Counsel
                                           (Income Tax & Accounting)

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