An LLC that never filed Form 8996 is allowed to self-certify late as a Qualified Opportunity Fund after its manager died
Plain-English summary
A Qualified Opportunity Fund (QOF) is an investment vehicle that lets
investors defer and reduce tax on capital gains if they put the money into
designated low-income "opportunity zones." To become a QOF, an entity must
self-certify each year by filing Form 8996 with its timely tax return. Here
an LLC taxed as a partnership was formed specifically to invest in opportunity
zone property, and its own name and operating agreement said it was meant to
be a QOF. But the manager, who has since died, had no QOF experience, and the
accountant mistakenly believed the LLC was a single-member entity and did not
know a Form 8996 was required, so no partnership return or Form 8996 was filed
for the first year. After the manager's death the mistake was found, and the
accountant filed the late partnership return with Form 8996 attached. The LLC
asked the IRS for a discretionary extension under Treasury Regulation section
301.9100-3. The IRS concluded the taxpayer acted reasonably and in good faith
(the manager and his assistant did not know the QOF setup rules, and the
accountant lacked QOF experience and relied on incorrect statements that the
LLC had a single member) and that relief would not prejudice the government
because the year was still open. The IRS treated the late Form 8996 as timely
filed, so the LLC is a QOF for that first year. The IRS gave no opinion on
whether the investments qualify or whether the entity actually meets the QOF
requirements.
Ruling snapshot
- Question: May an LLC get an extension of time to file Form 8996 to self-certify as a Qualified Opportunity Fund for its first year?
- Outcome: approved (late Form 8996 treated as timely filed)
- 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: 202616001
Release Date: 4/17/2026
Index Number: 1400Z.02-00, 9100.00-00
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
-------------------, ID No. -----------------
Telephone Number:
Refer Reply To:
CC:ITA:B05
PLR-108372-25
Date:
January 16, 2026
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LEGEND
Taxpayer = --------------------------------------------------------------------
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State = ------------
Manager = -----------------
Assistant = ----------------------
Accountant = ----------------------
Trust = -------------------------------------------
Firm = --------------------------------------------------
N1 = ---
Date 1 = -----------------
Date 2 = ---------------------------
Date 3 = --------------------
Date 4 = -------------------
Date 5 = ------------------------
Month 1 = ----------------------
Month 2 = ------------------
Year 1 = -------
Year 2 = -------
Dear ---------------:
This responds to Taxpayer’s ruling request dated Date 1, for relief under §§ 301.9100-1
and 301.9100-3 of the Procedure and Administration Regulations. Specifically,
Taxpayer requests an extension of time to file Form 8996, Qualified Opportunity Fund,
to (1) self-certify as a qualified opportunity fund (QOF), as defined in § 1400Z-2(d) of the
Internal Revenue Code, and (2) to be treated as a QOF, effective as of Date 2, as
provided under § 1400Z-2 and § 1.1400Z2(d)-1 of the Income Tax Regulations.
FACTS
Taxpayer has represented that the facts are as follows:
Taxpayer is a limited liability company organized under the laws of State on Date 2 and
is classified as a partnership for federal income tax purposes. Manager, who is now
deceased, was a fifty-percent member and the initial manager of Taxpayer. Manager’s
spouse also was a fifty-percent member of Taxpayer. Taxpayer is a cash method
taxpayer with a taxable year end of December 31. Taxpayer was formed for the purpose
of investing in qualified opportunity zone property as defined in § 1400Z-2(d)(2).
Manager had no experience investing in a QOF in Month 1 when he engaged an
attorney from Firm as legal counsel to form Taxpayer and advise Manager on
Taxpayer’s compliance with the opportunity zone provisions. Taxpayer’s State articles
of organization filed upon its formation include the term “opportunity fund” in the name
of Taxpayer. In addition, Firm prepared an operating agreement of Taxpayer, which
provides that Taxpayer is intended to constitute a QOF taxed as a partnership for
federal income tax purposes.
Assistant is a co-trustee of the Trust, dated Date 4, which holds Manager’s and
Manager’s spouse’s interests in Taxpayer. Assistant, who worked as an assistant to
Manager for over four years, starting in Year 1, participated in the creation and funding
of Taxpayer in Year 1. Assistant completed the transfer of funds in Month 2 to Taxpayer
on behalf of Manager and Manager’s spouse. These transfers were intended to
constitute “qualifying investments,” as defined in § 1.1400Z2(a)-1(b)(34).
Manager’s personal return preparer, Accountant, was engaged in Year 2 on an ongoing
basis for the preparation of Manager’s personal income tax returns. Accountant is a
certified public accountant with more than N1 years of public accounting experience. In
Year 1, Accountant did not have experience with respect to QOFs. Accountant was
unaware of the requirement for a QOF to file Form 8996 and to be structured as either a
corporation or a partnership. Accountant was not involved with the formation and
capitalization of Taxpayer and did not receive a copy of the operating agreement from
Manager until after Manager’s death.
Accountant timely filed Manager’s Year 1 personal income tax return with an
accompanying Form 8997, Initial and Annual Statement of Qualified Opportunity Fund
(QOF) Investments. Accountant was generally aware of Manager’s intent to form
Taxpayer and invest an amount of capital to defer income tax liability. However,
Accountant was unaware of the requirement to file a Form 8996 and did not prepare
and file a Year 1 income tax return for Taxpayer, because Accountant was under the
mistaken impression that Taxpayer was a single-member LLC based on statements
made by both Manager and Assistant.
The missed QOF election and fact that Taxpayer was not a single-member LLC were
discovered after Manager’s passing on Date 3. On or about Date 5, Accountant filed
Taxpayer’s Year 1 Form 1065 and accompanying Form 8996.
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) provides the rules for an entity to
self-certify as a QOF.
Section 1.1400Z2(d)-1(a)(2)(i) provides that an 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 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, including extensions.
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).
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.
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.
Under § 301.9100-3(b)(3), 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 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 before the taxpayer's receipt of a
ruling granting relief under § 301.9100-3. Even though Taxpayer seeks relief for the
taxable year ending December 31, Year 1, Taxpayer did not file its Year 1 Form 1065
until on or about Date 5. Thus, the period of limitations applicable to Taxpayer’s Year 1
tax year is not closed.
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 will not prejudice the interests of the government. Manager and Assistant lacked
knowledge of the requirements to set up a QOF, and Accountant lacked experience in
preparing tax returns for QOFs. Accountant also relied on incorrect statements made by
Manager and Assistant that Taxpayer was a single-member LLC. Accordingly, the Form
8996 attached to Taxpayer’s return for Year 1, filed Date 5, is 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. 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 the Year 1 return.
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. 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 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.
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.
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.
Sincerely,
Amy J. Pfalzgraf
Branch Chief, Branch 5
Office of Associate Chief Counsel
(Income Tax and Accounting)
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