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

Plain-English summary

A Delaware LLC was formed to invest in opportunity-zone property and intended to be a Qualified Opportunity Fund (QOF), a vehicle that lets investors defer and reduce tax on capital gains under section 1400Z-2. To become a QOF, the entity must self-certify by filing Form 8996 with its tax return by the return's due date (including extensions). Its accounting firm was supposed to file an extension request (Form 7004) but failed to, so the return and the Form 8996 could not be filed on time. The LLC asked for relief under Treasury Regulation 301.9100-3, which lets the IRS extend the time to make a regulatory election when the taxpayer acted reasonably and in good faith and granting relief won't prejudice the government. The IRS granted the extension: the LLC has 45 days from the date of the letter to file Form 8996 and make the QOF election. The ruling only fixes the late filing; it does not decide whether the entity actually meets the requirements to be a QOF or whether any investment in it qualifies.

Ruling snapshot

• Question: Should the IRS grant an extension of time under Treas. Reg. § 301.9100-3 for an LLC to file a late Form 8996 electing to self-certify as a Qualified Opportunity Fund under § 1400Z-2?
• Outcome: Approved (45-day extension to file Form 8996)
• 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: 202144010 Third Party Communication: None
Release Date: 11/5/2021 Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.22-00,
1400Z.02-00 Person To Contact:
--------------------------- , ID No. --------------
--------------------------- Telephone Number:
--------------------------- ---------------------
-------------------------- Refer Reply To:
CC:ITA:B04
----------------------------- PLR-103031-21
Date:
August 10, 2021

Taxpayer = ----------------------------------------------------

Date 1 = -----------------------

Date 2 = -----------------

Date 3 = ----------------

Date 4 = ----------------------

Date 5 = ---------------------------

Year = -------

Advisor = ------------------

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

This letter responds to Taxpayer's request dated Date 1. Specifically, Taxpayer
requests relief under Treasury Regulation §§ 301.9100-1 and 301.9100-3 to allow
Taxpayer to file Form 8996 (Qualified Opportunity Fund) and for the Form 8996 to be
treated as timely for purposes making an election: (1) to self-certify the Taxpayer as a
qualified opportunity fund (QOF), as defined in § 1400Z-2(d) of the Internal Revenue
PLR-103031-21 2

Code (Code); and (2) for the Taxpayer to be treated as a QOF as provided under Code
§ 1400Z-2 and Treasury Regulation § 1.1400Z2(d)-1(a).

                                     FACTS

Taxpayer, organized as a limited liability company under the laws of the state of
Delaware, was formed on Date 2, for the intended purpose of investing in “qualified
opportunity zone property” as defined in Section 1400Z-2(d)(2). Taxpayer’s operating
agreement states the Taxpayer’s intention to be a QOF and the need to execute and file
certificates and documents to carry out that purpose.

Members of Taxpayer were not well versed in tax law or the procedures for forming a
QOF. As such, the members retained Advisor on behalf of Taxpayer to serve as
Taxpayer’s accounting firm and tax advisor. Advisor was responsible for preparing and
filing Taxpayer’s Form 1065 (U.S. Return of Partnership Income) for Year along with
Form 8996 to self-certify Taxpayer as a QOF as of Date 3.

Advisor advised Taxpayer to file for an extension of time to file Taxpayer’s Year tax
return. Advisor was expected to file Form 7004 (Application for Automatic Extension of
Time to File Certain Business Income Tax, Information, and Other Returns) by Date 4,
thereby extending the deadline to file Taxpayer’s tax return for Year to Date 5.
However, Advisor failed to file a Form 7004 on behalf of Taxpayer.

A short time after Date 4, Advisor revealed to Taxpayer that it failed to file the Form
7004. Consequently, Advisor informed Taxpayer that Taxpayer would not be able to
timely file its Year tax return and Form 8996 to self-certify as a QOF. On Date 1,
Taxpayer submitted this request asking for relief under Treasury Regulation §§
301.9100-1 and 301.9100-3.

                              LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for rules for the
certification of QOFs. Treasury Regulation § 1.1400Z2(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 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 the Taxpayer did not file its Form 8996 by the due date of its income tax
return due to Advisor’s failure to file Form 7004 to extend the return due date, despite
Advisor being aware of the need to file Form 7004.
PLR-103031-21 3

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 section 301.9100-1(b). According to Treasury Regulation § 301.9100-
3(a), requests for extensions of time for regulatory elections that do not meet the
requirements of Treasury Regulation § 301.9100-2 (automatic extensions) must be
made under the rules of Treasury Regulation § 301.9100-3. Additionally, requests for
relief subject to § 301.9100-3 will be granted when the taxpayer provides evidence to
establish that the taxpayer acted reasonably and in good faith, and that the granting of
relief will not prejudice the interests of the government.

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 § 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)
PLR-103031-21 4

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.

Based on the facts and information submitted and the representations made, we
conclude that the 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 the Taxpayer an extension of 45 days from the date of this
letter ruling to file Form 8996 to make the election under section 1400Z-2 and section
1.1400Z2(d)-1(a)(2)(i).

                                     CAVEATS

This ruling is based upon facts and representations submitted by the Taxpayer and
accompanied by penalty of perjury statements 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 factual
information, representations, and other data submitted.

This ruling addresses the granting of Treasury Regulation § 301.9100-3 relief as applied
to the election to self-certify the Taxpayer as a QOF by filing Form 8996 for Year 1.
Specifically, we have no opinion, either express or implied, concerning whether any
investments made into Taxpayer are qualifying investments as defined in Treasury
Regulation § 1.1400Z2 (a)-1(b)(34) or whether Taxpayer meets the requirements and
structure under section 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.

A copy of this letter must be attached to any 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.

This ruling is directed only to the taxpayer requesting it. Code § 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 Code § 6110.
PLR-103031-21 5

Pursuant to the Form 2848, Power of Attorney and Declaration of Representation, on
file, we are sending a copy of this letter to Taxpayer's authorized representative.

This letter is being issued electronically in accordance with Rev. Proc. 2020-29, 2020-
21 I.R.B. 859. A paper copy will not be mailed to the taxpayer.

                                            Sincerely,



                                            Lisa Mojiri-Azad
                                            Senior Technician Reviewer, Branch 4
                                            Office of Associate Chief Counsel
                                            (Income Tax & Accounting)

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