9100 relief to file a late Form 8996 self-certifying as a Qualified Opportunity Fund

Plain-English summary

To get the tax benefits of investing in an Opportunity Zone, a fund must "self-certify" as a Qualified Opportunity Fund (QOF) by filing Form 8996 with its tax return for its first year. Here, an LLC taxed as a partnership was set up to invest in Opportunity Zone property, funded with a member's eligible capital gain, but its CPA wrongly assumed the LLC had no filing obligation for its first year (no assets or activity yet) and filed neither the partnership return nor Form 8996. A later firm caught the error, and the LLC promptly filed the missing forms and asked for relief. Under Treasury Regulation Section 301.9100-3, the IRS can grant more time for a missed regulatory election when the taxpayer acted reasonably and in good faith (including reasonable reliance on a tax professional who failed to advise the election) and relief will not prejudice the government. The IRS found those standards met and treated the late-filed Form 8996 as timely, so the LLC is certified as a QOF for its first year. The ruling does not extend the deadline for the partnership return itself, and it expresses no view on whether the fund actually qualifies as a QOF or holds qualifying property.

Ruling snapshot

• Question: May an LLC get an extension of time to file a late Form 8996 self-certifying as a Qualified Opportunity Fund for its first year?
• Outcome: approved (late Form 8996 treated as timely; QOF election effective for Year 1)
• Key authorities: IRC § 1400Z-2(d), (e)(4); Treas. Reg. § 1.1400Z2(d)-1; Treas. Reg. §§ 301.9100-1, -3

Full text (IRS public release)

 Internal Revenue Service                                       Department of the Treasury
                                                                Washington, DC 20224

 Number: 202503011                                              Third Party Communication: None
 Release Date: 1/17/2025                                        Date of Communication: Not Applicable
 Index Number: 1400Z.01-00, 9100.00-00
                                                                Person To Contact:
 ---------------------------                                    ----------------------, ID No. ------------------
 --------------------------------------                         Telephone Number:
 --------------------------                                     --------------------
 ------------------------                                       Refer Reply To:
                                                                ----------------
                                                                PLR-110695-24
                                                                Date: October 22, 2024




Taxpayer                   =        ----------------------------------------------------
Submission Date            =        ---------------- --
Date 1                     =        ----------------------
Date 2                     =        --------------------
Date 3                     =        -------------------------
Date 4                     =        ------------------
State Z                    =        ----------
Year 1                     =        -------
Year 2                     =        -------
Year 3                     =        -------
Members                    =        ---------------------------------------------
                           =        -------------------------------------------------
                           =        ---------------------------------------------
Taxpayer
  Representative           =        ---------------------------------------------
CPA                        =        ------------------
Firm                       =        ---------------------
Operating
Agreement                  =         ------------------------------------------------------------
--------------------------------------------------------------
N1                         =        ----

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

This ruling responds to Taxpayer’s request for a letter ruling requested on Submission
Date and supplemented on Date 3. Taxpayer requests relief under section 301.9100-3
of the Procedure and Administration Regulations. Specifically, Taxpayer requests an
extension of time to file a self-certifying election on Form 8996, Qualified Opportunity
Fund, (Form 8996) for Taxpayer to be treated as a qualified opportunity fund (QOF), as
defined in section 1400Z-2(d) of the Internal Revenue Code and section 1.1400Z2(d)-
1(a) of the Income Tax Regulations effective as of Date 1.
PLR-110695-24                                 2

                                          FACTS

Taxpayer was organized as a limited liability company under the laws of State Z on
Date 1 and is treated as a partnership for federal income tax purposes. Taxpayer was
formed with contributions from its Members. The majority Member represents that it
had eligible gain as defined in section 1400Z-2 and the regulations thereunder from
Year 1 that it timely contributed to Taxpayer.

Taxpayer’s overall method of accounting is the cash receipts and disbursements
method of accounting, and Taxpayer has a Date 4 tax year-end. Taxpayer was formed
to invest in qualified opportunity zone property within the meaning of section 1400Z-
2(d). Operating Agreement, section N1.

According to the affidavits and information provided to us, Taxpayer Representative
engaged CPA to handle the tax filings for Taxpayer, including filing Taxpayer’s first filed
Form 1065, U.S. Return of Partnership Income. During late Year 1 and early Year 2,
Taxpayer Representative told CPA that Taxpayer intended to purchase real estate in an
Opportunity Zone and that Taxpayer had no business activity in Year 1. Taxpayer
Representative was not aware of the requirement to make an election on Form 8996 for
the first tax year of Taxpayer’s existence, and CPA did not inform Taxpayer
Representative that such an election was required.

CPA, despite agreeing to handle the tax filings of Taxpayer, mistakenly believed that
Taxpayer had no filing obligation for Year 1 due to Taxpayer not having any assets or
having conducted any business activity for Year 1. As a result, CPA failed to file the
Form 1065 and Form 8996 for Year 1.

In Year 3, Taxpayer retained Firm for assistance related to QOF tax filings. As part of
its onboarding process, a representative of Firm determined that Taxpayer had a filing
obligation for Year 1, and that Taxpayer should have filed a Form 8996 for Year 1.

After this discovery, Taxpayer and Firm moved as expeditiously as possible to seek this
letter ruling, requesting relief under section 301.9100-3. Taxpayer also filed its required
Year 1 tax forms, including Form 8996, on Date 2, and has requested that the Internal
Revenue Service (Service) grant additional time to file Form 8996 for Year 1.

Taxpayer represents that granting of the relief under section 301.9100-3 is proper, as it
acted reasonably and in good faith, and the grant of relief will not prejudice the interests
of the government.

                                   LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations or rules for the
certification of QOFs. Section 1.1400Z2(d)-1(a)(2) provides the rules for an entity to
self-certify as a QOF. Section 1.1400Z2(d)-1(a)(2)(i) provides that the entity electing to
PLR-110695-24                                3

be certified as a QOF must do so on a timely filed return 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, 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 CPA did not file Taxpayer’s Form 8996 because CPA mistakenly believed
that Taxpayer had no filing obligation for Year 1.

Because section 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 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.

Under section 301.9100-3(b), a taxpayer is deemed to have acted reasonably and in
good faith if the taxpayer requests relief before the failure to make the regulatory
election is discovered by the Service, or reasonably relied on a qualified tax
professional, and the tax professional failed to make, or advise the taxpayer to make,
the election. However, a taxpayer is not considered to have reasonably relied on a
qualified tax professional if the taxpayer knew or should have known that the
professional was not competent to render advice on the regulatory election or was not
aware of all relevant facts.

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-110695-24                                 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.

Based on the facts and 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. Taxpayer has satisfied the requirements
for the granting of relief under section 301.9100-3(b). Consequently, the Form 8996
attached to Taxpayer’s return for Year 1, filed Date 2, is considered timely filed and
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 for Year 1. This letter ruling does not grant an extension
of time to file Taxpayer’s Form 1065. Taxpayer should submit a copy of this letter ruling
to the Service Center where Taxpayer files its returns along with a cover letter requesting
the Service associate this ruling with the Year 1 return.

This ruling is based upon facts and representations submitted on behalf of the
Taxpayer, by Taxpayer Representative and CPA and accompanied in each case by a
penalty of perjury statement 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 information, representations,
and other data submitted.

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 express no opinion, either express or implied, concerning
whether any investments made into Taxpayer are qualifying investments as defined in
section 1.1400Z2 (a)–1(b)(34) or whether Taxpayer meets the requirements under
section 1400Z-2 and the regulations thereunder to be a QOF. Further, 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
PLR-110695-24                                  5

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.

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 your authorized representatives.

                                       Sincerely,



                                       Gerald Semasek
                                       Assistant to the Branch Chief, Branch 5
                                       Office of Associate Chief Counsel
                                       (Income Tax & Accounting)


 cc: -----------------
     -------------------------