9100 relief for late Forms 8996 self-certifying a Qualified Opportunity Fund

Plain-English summary

An LLC taxed as a partnership was formed to operate as a Qualified Opportunity Fund (QOF), the vehicle that lets investors defer and reduce tax on capital gains reinvested in designated low-income areas. To become a QOF, the entity must self-certify by attaching Form 8996 to a timely filed tax return. Because of a miscommunication with its accounting firm, the taxpayer's representative wrongly believed the firm had been engaged to prepare the partnership return, so no return and no Form 8996 were filed on time for two years. Once the mistake surfaced, the taxpayer filed the late returns with Forms 8996 attached and asked the IRS for an extension of time under Treasury Regulation section 301.9100-3. The IRS found the taxpayer reasonably relied on a tax professional, acted in good faith, and that relief would not prejudice the government. It treated the two late Forms 8996 as timely, so the entity is self-certified as a QOF for both years. The IRS did not decide whether the entity actually meets the substantive QOF requirements or whether its investments qualify.

Ruling snapshot

• Question: May a fund that missed the deadline to file Form 8996 get an extension of time to self-certify as a Qualified Opportunity Fund?
• Outcome: approved
• 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: 202505009                             Third Party Communication: None
Release Date: 1/31/2025                       Date of Communication: Not Applicable
Index Number: 9100.00-00, 1400Z.01-00,
              1400Z.02-00                     Person To Contact:
                                              ---------------------, ID No. -----------------
----------------------------                  Telephone Number:
-------------------------------               --------------------
-----------------------------                 Refer Reply To:
-------------                                 CC:ITA:B04
-----------------------------------           PLR-108971-24
In Re: Private Letter Ruling Request          Date:
                                              November 05, 2024




                                        LEGEND

Taxpayer        = -------------------------
                  -------------------------
                  ------------------------
State Z         = -------------
Individual      = ------------------
CPA             = ---------------
Accounting Firm = -------------------------
                  -----
Month 1         = --------------------
Month 2         = -----------------
Month 3         = --------------------
Month 4         = --------------
Month 5         = ------------------
Tax Year        = ----------
Date 1          = -------------------------
                  -------
Date 2          = -----------------------
Date 3          = ------------------
Year 1          = -------------------------
                  ------------------
Year 2          = -------------------------
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PLR-108971-24                                         2

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

This letter responds to Taxpayer’s request, dated Date 3. Specifically, Taxpayer
requests an extension of time, under §§ 301.9100-1 and 301.9100-3 of the Procedure
and Administration Regulations, to file Taxpayer’s Forms 8996, Qualified Opportunity
Fund, for purposes of making the election to: (1) self-certify Taxpayer as a qualified
opportunity fund (“QOF”) as defined in § 1400Z-2(d) of the Internal Revenue Code; and
(2) be treated as a QOF, effective as of the month Taxpayer was formed, as provided
under § 1400Z-2(d) and § 1.1400Z(d)-1(a) (“Request”).1

                                                 FACTS

Based on the provided information and representations, Taxpayer was organized, on
Date 1, as a limited liability company, under the laws of State Z and is classified as a
partnership for federal income tax purposes. Taxpayer was organized for the purpose of
qualifying as a QOF to invest indirectly in qualified opportunity zone property as defined
in § 1400Z-2(d)(2). Taxpayer employs an accrual method of accounting and has a
taxable year end of Tax Year.

Individual, Taxpayer’s designated tax-matters representative and limited partner, was
responsible for ensuring Taxpayer’s federal tax returns were prepared and filed on a
timely basis. Individual, a partner with a law firm, had a general awareness of the tax-
compliance requirements of QOFs but did not possess an expertise in QOFs. CPA is a
certified public accountant and partner with Accounting Firm.

During Month 1, Individual and CPA’s Accounting Firm began preliminary discussions
about the preparation of Individual’s personal tax return and Taxpayer’s Form 1065,
U.S. Return of Partnership Income, for Year 1. Around this time, CPA provided, and
Individual signed a service agreement with Accounting Firm for the preparation of
Individual’s personal income tax return (“Service Agreement 1”). Due to a
miscommunication between Individual and CPA’s Accounting Firm, Individual
mistakenly believed Service Agreement 1 also covered the preparation of Taxpayer’s
Form 1065 for Year 1.

Taxpayer’s Year 1 tax return was due on Date 2. Taxpayer, however, did not timely file
by that date either a Form 1065 with a Form 8996 attached, or a Form 7004, Application
for Automatic Extension of Time to File Certain Business Income Tax, Information, and
Other Returns. As such, Taxpayer did not file timely a Form 8996 for Year 1.

During Month 2, CPA and Individual resumed discussions about Individual’s personal
tax return. At this time, the parties discovered the miscommunication regarding on
Taxpayer’s Year 1 tax return when Individual inquired about the status of the return.
CPA informed Individual that the engagement process to have Accounting Firm prepare
1 Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code

or the Treasury Regulations (26 CFR Part 1) or (26 CFR Part 301) as applicable.
PLR-108971-24                                  3

Taxpayer’s Year 1 tax return had not been completed. During Month 3, Individual
signed a service agreement with Accounting Firm, formally engaging Accounting Firm to
prepare Taxpayer’s Year 1 and Year 2 federal income tax returns (“Service Agreement
2”).

During Month 4, Accounting Firm personnel advised Individual that a timely filed Form
1065 with an attached Form 8996, was required for Taxpayer to be self-certified as a
QOF effective as of the month it was formed, and that Taxpayer should submit a private
letter ruling, requesting relief pursuant to § 9100 of the Procedure and Administration
Regulations. In Month 5, Accounting Firm personnel filed Taxpayer’s tax returns, with
Forms 8996 attached, for Year 1 and Year 2. At that time, Individual also formally
engaged Accounting Firm to prepare this Request, which was promptly submitted under
§§ 301.9100-1 and 301.9100-3.

Individual represents, on Taxpayer’s behalf, the following: (1) This Request was
submitted before the failure to properly make the election for either Year 1 or Year 2
was discovered by the Service; (2) Taxpayer is not seeking to alter a return position for
which an accuracy-related penalty has been or could be imposed under section 6662 as
of Date 4; (3) Taxpayer did not knowingly forego making the election; (4) The decision
to seek relief did not involve hindsight, (5) no specific facts have changed since the due
date for making the Year 1 election that would make the election more advantageous
than if it would have been had the election been timely made; (6) The requested relief
will not result in the Taxpayer having a lower tax liability in the aggregate for all affected
tax years than the Taxpayer would have had if the election had been timely made
(considering the time value of money); and (7) The period of limitations on assessment
under section 6501(a) has not closed for the tax year in which the election should have
been made or any of the subsequent tax years that would be affected by the election
had it been timely made.

                                   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) of the regulations 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 Taxpayer failed to
file the Form 8996 by the due date of its income tax return (including extensions) due to
a miscommunication between Individual and CPA’s Accounting Firm, resulting in
Individual’s mistaken belief that the latter have been engaged to prepare, on a timely
basis, Taxpayer’s Year 1 tax return.
PLR-108971-24                                 4

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 § 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 301.9100-1(b) defines the term “regulatory election” as including any election
whose due date is prescribed by a regulation published in the Federal Register. 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 § 301.9100-1(b).

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.

Under § 301.9100-3(b)(2), a taxpayer, however, 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.

Section 301.9100-3(b)(3) provides a taxpayer will not be considered 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 § 6662 at the time the taxpayer requests relief, and
       the new position requires or permits a regulatory election for which relief is
       requested;
PLR-108971-24                                 5

       (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 a 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 § 6501(a) before the taxpayer's receipt of a
ruling granting relief under this section.

                                      CONCLUSION

Based solely on the facts and information submitted and the representations made in
connection with this ruling request, we conclude that Taxpayer has acted reasonably
and in good faith, and that the granting of relief will not prejudice the interests of the
Government. Accordingly, based solely on the facts and information submitted, and the
representations made as part of the Request, Taxpayer has satisfied the requirements
for the granting of relief.

Accordingly, the Forms 8996, attached to Taxpayer’s Year 1 and Year 2 income tax
returns, filed in Month 5, are considered timely filed, and Taxpayer has thereby made
the election under § 1400Z-2 and § 1.1400Z2(d)-1(a)(2)(i) to self-certify as a QOF for
Year 1 and Year 2. Taxpayer should submit a copy of this letter ruling to the Service
Center where Taxpayer files its returns along with a cover letter requesting that the
Service associate this ruling with Taxpayer’s Year 1 and Year 2 returns.

                                         CAVEATS

The granting of an extension of time in this ruling letter is not a determination that
Taxpayer is otherwise eligible to self-certify as a QOF. See § 301.9100-1(a).

This ruling is based upon facts and representations submitted by Taxpayer and
accompanied 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
PLR-108971-24                                6

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 § 301.9100-3 relief as applied to the election to
self-certify Taxpayer as an QOF by filing Form 8996 for Years 1 and 2.

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, neither express nor implied,
concerning whether any investments made into Taxpayer are qualifying investments as
defined in § 1.1400Z-2(a)-1(b)(34), or whether Taxpayer met or meets the requirements
under § 1400Z-2 and the regulations thereunder to be a QOF. Further, we express no
opinion on whether any interest indirectly owned by Taxpayer qualifies as qualified
opportunity zone property, as defined in § 1400Z-2(d)(2), or whether the indirect interest
would be treated as a qualified opportunity zone business, as defined in § 1400Z-
2(d)(3). Nor do we express any opinion regarding the tax treatment of the instant
transaction under the provisions of any other sections of the Internal Revenue Code or
Treasury 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.
Finally, we express no opinion as to the timeliness of Taxpayer’s Year 1 and Year 2
income tax returns.

This ruling is directed only to the taxpayer requesting it. 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 § 6110.

In accordance with the Form 2848, Power of Attorney and Declaration of
Representative, on file with this office, a copy of this letter is being sent to Taxpayer’s
authorized representatives. This letter ruling is being issued electronically in
accordance with Rev. Proc. 2024-1, 2024-1 I.R.B. 1. A paper copy will not be mailed to
Taxpayer.


                                                 Sincerely,




                                                 Alexa T. Dubert
                                                 Senior Technician Reviewer, Branch 4
                                                 Associate Office of Chief Counsel
                                                 (Income Tax & Accounting)
PLR-108971-24                         7




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