Real estate partnership receives 60 days for late QOF self-certification

Plain-English summary

A partnership was organized to operate as a Qualified Opportunity Fund and develop an office building in an opportunity zone. Its investors reported their interests as QOF investments, but two successive tax preparers failed to attach Form 8996 to the partnership's returns for its first three years. A later accounting firm filed the form for subsequent years and discovered the earlier omissions. The IRS found that the partnership reasonably relied on tax professionals, requested relief before the IRS discovered the failures, and met the other standards for discretionary relief. It granted 60 days to file Form 8996 for the requested year with an amended return or administrative adjustment request. The IRS did not determine whether the partnership or any investment otherwise qualified under the opportunity-zone rules.

Ruling snapshot

• Question: May the partnership make a late QOF self-certification election for the requested tax year?
• Outcome: Approved, with a 60-day extension
• Key authorities: IRC § 1400Z-2; Treas. Reg. §§ 1.1400Z2(d)-1(a), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202548021
Release Date: 11/28/2025
Index Number: 9100.00-00, 1400Z.02-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
--------------------------, ID No. ----------------

Telephone Number:

Refer Reply To:
CC:ITA:B05
PLR-107191-25

Date:
July 11, 2025

------------------------------

-------------------------------------------------------

Legend:

Taxpayer = -------------------------------------------------------------------
-------------
Date 1 = ---------------------
Date 2 = ---------------------
Date 3 = -------------------
Date 4 = ---------------------------
State = ----------------
Manager A = --------------------------
Individual A = -----------------
Individual B = -------------------
Year 1 = -------
Year 2 = -------
Year 3 = -------
Year 4 = -------
Year 5 = -------
Entity A = -----------------------------
Entity B = -----------------------
Accounting Firm = ---------------------------------------
Tax Preparer = -------------------------------
Law Firm = -------------------------------
Operating Agreement = -------------------------------------------------------------------
------------------------------

PLR-107191-25 2

Amended Operating Agreement = -------------------------------------------------------------------
------------------------------------------------------------

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

This letter responds to Taxpayer’s request for a ruling dated Date 1 and its additional
submission relating to that request dated Date 3. Specifically, Taxpayer requests relief
under §§ 301.9100-1 through 301.9100-3 of the Procedure and Administration
Regulations, granting an extension of time to make an election under § 1.1400Z2(d)-
1(a)(2)(i) of the Income Tax Regulations to self-certify as a Qualified Opportunity Fund
(QOF), as defined in § 1400Z-2(d) of the Internal Revenue Code (Code). The election
would be effective for the tax year Year 3.

FACTS

Taxpayer represents the facts, supported by affidavits, as follows:

Taxpayer is a limited liability company organized under the laws of State on Date 2.
Taxpayer is treated as a partnership for Federal income tax purposes. Taxpayer uses
the cash method of accounting and the calendar year as its taxable year. Taxpayer is
managed by Manager A, which is in turn managed by Individual A. Individual A was
responsible for causing the tax returns of Taxpayer to be filed for the year at issue.

Taxpayer’s submission includes a copy of its Operating Agreement and Amended
Operating Agreement, which reflect that Taxpayer was organized for the purpose of
operating as a Qualified Opportunity Fund, as defined in section 1400Z-2(d)(1) of the
Code, and to develop and own a real estate project comprising the construction of an
office building in a Qualified Opportunity Zone, as defined in section 1400Z-1 of the
Code. Since Date 2, the members in Taxpayer have made contributions to Taxpayer,
which have been used in construction.

In Year 2, Entity A made contributions to Taxpayer in exchange for a majority of the
equity interests in Taxpayer. Individual A, owner of Entity A, intended for these
contributions to be qualifying contributions and attached Form 8997, Initial and Annual
Statement of QOF Investments, to his income tax returns for Years 2, 3, 4, and 5.

In Years 3 and 4, Entity B made contributions to Taxpayer. Individual B, owner of Entity
B, intended for these contributions to be qualifying contributions and attached Form
8997 to his income tax returns for Years 3, 4 and 5.

Taxpayer relied on its original tax preparer to prepare its tax returns. Taxpayer was not
aware that in order for Taxpayer to elect to be a QOF it was required to attach to its tax
return a Form 8996, Qualified Opportunity Fund. Individual A also relied on the original

PLR-107191-25 3

tax return preparer to file returns for other partnerships which he controlled. The
original tax preparer failed attach a Form 8996 to Taxpayer’s Form 1065, U.S. Return of
Partnership Income, for Year 1.

Respecting Years 2 and 3, Taxpayer’s returns were prepared by a second tax preparer.
Individual A also relied on the second tax preparer to prepare and file returns for other
partnerships which he controlled for Years 2 and 3. The second tax preparer also failed
to attach a Form 8996 to Taxpayer's returns for Years 2 and 3. Taxpayer filed its return
for Year 3 pursuant to an extension of time to file on Date 4.

Taxpayer engaged Accounting Firm to prepare and file its returns for Years 4 and 5.
Accounting Firm C attached a Form 8996 to Taxpayer’s Form 1065 for Years 4 and 5.
In preparing Taxpayer’s Form 1065 for Year 5, Tax Preparer, a partner at Accounting
Firm, realized the original tax preparer and the second tax preparer had failed to attach
the Form 8996 to the Taxpayer’s returns for years 1, and 2 and 3, respectively.

Upon discovery of the error, Tax Preparer informed Taxpayer of the consequences of
the failure to file the Forms 8996. Taxpayer engaged Law Firm to prepare and file a
request for relief for Year 3. Taxpayer did not receive a communication from the
Internal Revenue Service (Service) indicating that the Service discovered Taxpayer’s
failure to file a timely return with attached Form 8996 for Year 1 through Year 3 before
submitting this ruling request.

LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) of the Code directs the Secretary to prescribe regulations and
rules for the certification of QOFs. Section 1.1400Z2(d)-1(a)(2) of the Income Tax
Regulations 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 be certified as a QOF must do
so annually 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 Taxpayer did not file its Form 8996 by the due date of its income tax
return due to the second return preparer’s failure to include the Form 8996 with
Taxpayer’s Year 3 return.

Because § 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).

PLR-107191-25 4

Sections 301.9100-1 through 301.9100-3 of the Procedure and Administration
Regulations 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.

Under § 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, § 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 § 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 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).

PLR-107191-25 5

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.

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. 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 to make the election to self-certify as a QOF under § 1400Z-2 and
§ 1.1400Z2(d)-1(a)(2)(i). The election must be made on a completed Form 8996
attached to the Taxpayer’s amended Year 3 tax return or by making an administrative-
adjustment request (as applicable).

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
§ 1.1400Z2(a)–1(b)(34) or whether Taxpayer meets the requirements under § 1400Z-
2 and the regulations thereunder to be a QOF.

Further, 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.

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.

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.

The rulings contained in this letter are based upon information and representations
submitted by Taxpayer and accompanied by a penalty of perjury statement executed by
an appropriate party. While this office has not verified any of the material submitted in
support of the request for rulings, it is subject to verification on examination.

PLR-107191-25 6

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being faxed to your authorized representative.

Sincerely,

Gerald Semasek
Senior Technician Reviewer, Branch 5
Office of Associate Chief Counsel
(Income Tax & Accounting)

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