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

Plain-English summary

To claim Opportunity Zone tax benefits, an entity must "self-certify" as a Qualified Opportunity Fund (QOF) by attaching Form 8996 to a timely filed return. Here, an LLC taxed as a partnership was formed to hold Opportunity Zone property, but its accountant never filed the LLC's first-year return, and neither the accountant nor the taxpayer realized the Form 8996 election was due with that return. An advisor discovered the missed return in a later year, and the LLC hired tax counsel and asked the IRS for more time. Under Treasury Regulation Section 301.9100-3, the IRS can extend a missed regulatory election when the taxpayer acted reasonably and in good faith (including reasonable reliance on a tax professional who failed to act) and relief will not prejudice the government. The IRS found those standards met and granted 60 days from the date of the letter to file the Form 8996. The relief covers only the election deadline; the IRS expressed no opinion on whether the entity actually qualifies as a QOF or whether its holdings are qualifying Opportunity Zone 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?
• Outcome: approved (60-day extension granted to file Form 8996)
• Key authorities: IRC § 1400Z-2(d), (e)(4); Treas. Reg. § 1.1400Z2(d)-1(a)(2); Treas. Reg. §§ 301.9100-1, -3

Full text (IRS public release)

 Internal Revenue Service                                        Department of the Treasury
                                                                 Washington, DC 20224

 Number: 202504012                                               Third Party Communication: None
 Release Date: 1/24/2025                                         Date of Communication: Not Applicable
 Index Number: 1400Z.02-00, 9100.00-00
                                                                 Person To Contact:
 ------------------------                                        ----------------, ID No. -----------------
 ------------------------                                        Telephone Number:
 --------------------------------------                          --------------------
 ----------------------                                          Refer Reply To:
                                                                 CC:ITA:B08
                                                                 PLR-112785-24
                                                                 Date:
                                                                 October 22, 2024


TY:---
-------

LEGEND

 Taxpayer           =   --------------------------------------
 Advisor            =   -------------------------------
 Accountant         =   -----------------------------------
 Date 1             =   ------------------
 Date 2             =   -----------------
 Date 3             =   ------------------------
 Month 1            =   ------------------
 Manager            =   -------------------
 Member 1           =   -------------------------
 Member 2           =   -----------------
 State Z            =   -------------
 Year 1             =   -------
 Year 2             =   -------
 Year 3             =   -------
 Year 4             =   -------

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

This letter responds to Taxpayer’s request dated Date 1. Specifically, Taxpayer
requests relief, under sections 301.9100-1 and 301.9100-3 of the Procedure and
Administrative Regulations, for an extension of time to (1) make a timely election under
section 1.1400Z2(d)-1(a)(2)(i) of the Income Tax Regulations to be certified as a
qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal
PLR-112785-24                                 2

Revenue Code and (2) for Taxpayer to be treated as a QOF, effective as of Month 1, as
provided by section 1400Z-2(d) and section 1.1400Z2(d)-1(a).

                                          FACTS

According to the information and representations provided, Taxpayer was organized as
a limited liability company under the laws of State Z on Date 2 and is treated as a
partnership for Federal income tax purposes. Taxpayer is a cash method taxpayer and
Taxpayer’s annual accounting period is the calendar year. Taxpayer has two Members
and is managed by Manager.

Members engaged Advisor to advise them on the disposition of certain real properties
and the formation of a QOF. On Date 2, Members formed Taxpayer for the purposes of
acquiring an interest in a property which qualified as qualified opportunity zone property
(QOZ property) (within the meaning of 1.1400Z2(d)-1(c)(1)). Taxpayer had no items of
income, gain, loss, expense, or credit during Year 2.

The Members have engaged Accountant to file their tax returns since Year 1. During
Year 2 (the year in which Taxpayer was formed) and Year 3, Accountant, Advisor, and
Manager engaged in numerous conversations about the formation and operation of
Taxpayer and Taxpayer believed that Accountant had all information necessary to
timely file Taxpayer’s Year 2 Federal income tax return. However, Accountant failed to
file Taxpayer’s Year 2 Federal income tax return, and neither Accountant nor Taxpayer
were aware that Taxpayer’s election to self-certify as a QOF was due by the due date of
Taxpayer’s Federal income tax return (including extensions).

Advisor discovered in Year 4 that Taxpayer’s Year 2 return had not been filed and as
result, no QOF election had been made. Taxpayer subsequently engaged tax counsel
to address the failure, resulting in this letter ruling request.

Taxpayer represents that the granting of relief under section 301.9100-3 of the
Procedure and Administration Regulations will not result in a lower tax liability for the
year affected by the election.

                                  LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) of the Internal Revenue Code directs the Secretary to
prescribe regulations as may be necessary to carry out the purposes of section 1400Z-
2, including rules for the certification of QOFs. Section 1.1400A2(d)-1(a)(2) of the
Income Tax Regulations provides the rules for an entity to self-certify as a QOF.
Section 1.400Z2(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 the Internal Revenue in the Internal Revenue Service forms or
instructions, or in publications or guidance published in the Internal Revenue Bulletin.
PLR-112785-24                                3

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 Federal income tax return (including extensions). The
information provided indicates that Taxpayer did not file its Form 8996 by the due date
of its Federal income tax return (including extensions) due to Accountant’s error.

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(a) 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 granting 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 failed to make the election because, after
exercising reasonable diligence (taking into account the taxpayer’s experience and the
complexity of the return or issue), the taxpayer was unaware of the necessity for the
election, 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 reasonable 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.
PLR-112785-24                                 4

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 information provided, including affidavits and representations under
penalties of perjury, we conclude that Taxpayer has acted reasonably and in good faith,
and that granting a reasonable extension of time for Taxpayer to file Form 8996 will not
prejudice the interests of the government. Accordingly, based solely on the facts and
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
with Taxpayer’s federal tax return, to make the election to self-certify as a QOF under
section 1400Z-2 and section 1.1400Z2(d)-1(a)(2)(i). The election must be made on a
completed Form 8996 attached to Taxpayer’s tax return or administrative-adjustment
request (as applicable).

                                        CAVEATS

This ruling is based upon facts and representations 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 factual
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 the 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
such entity would be treated as a qualified opportunity zone business, as defined in
PLR-112785-24                                  5

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 representative.

A copy of this letter must be attached to any income 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.

                                           Sincerely,




                                           Shareen S. Pflanz
                                           Branch Chief, Branch 8
                                           Office of Associate Chief Counsel
                                           (Income Tax & Accounting)



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