9100 relief lets a qualified opportunity fund self-certify late on Form 8996 after its preparer wrongly told it not to file

Plain-English summary

A limited liability company set up as a Qualified Opportunity Fund (QOF) missed the deadline to self-certify by filing Form 8996 with its tax return. It had hired a tax firm to prepare the return, but that firm told the fund, right at the extended filing deadline, not to file because it doubted the fund's structure qualified. A different advisor later confirmed the structure was fine and the first firm's concerns were unwarranted. The fund asked the IRS for "9100 relief," a discretionary extension of time to make a regulatory election under Treas. Reg. § 301.9100-3, and the IRS granted it. Self-certifying and electing QOF status are regulatory elections, and relief is available when the taxpayer acted reasonably and in good faith and granting relief will not prejudice the government. Because the fund missed the deadline due to intervening events beyond its control (its preparer's erroneous advice), it is deemed to have acted reasonably and in good faith, so the IRS treated the Form 8996 as timely filed. The ruling stresses that it decides only the timeliness of the election: it takes no position on whether the fund actually qualifies as a QOF or whether any investment in it is a qualifying investment. This matters because the Opportunity Zone program's capital-gains tax benefits depend on a valid, timely self-certification, and 9100 relief can rescue a fund whose late filing was caused by professional error.

Ruling snapshot

• Question: Should the QOF get an extension of time under § 301.9100-3 to self-certify on Form 8996 after its preparer wrongly advised it not to file by the extended deadline?
• Outcome: Approved (9100-3 relief granted; 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: 202152017 [Third Party Communication:
Release Date: 12/30/2021 Date of Communication: Month DD, YYYY]
Index Number: 9100.00-00, 9100.22-00,
1400Z.02-00 Person To Contact:
--------------------------, ID No. -------------
-------------------------- Telephone Number:
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---------------------------------- Refer Reply To:
CC:ITA:B04
------------------------------------ PLR-124266-20
DATE: 09/10/2021

VIA FAX

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

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

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

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

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

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

Date 6 = ---------------------------

Date 7 = -------------------
PLR-124266-20 2

Date 8 = -------------------

Date 9 = ---------------------------

Year 1 = -------

Advisor 1 = ---------------------------

Advisor 2 = -------------------------------------

Advisor 3 = ---------------------------------------

Advisor 4 = ------------------------

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 for Taxpayer's
Form 8996 (Qualified Opportunity Fund), as filed on Date 2, to be treated as timely for
purposes of the election: (1) to self-certify the Taxpayer as a qualified opportunity fund
(QOF), as defined in § 1400Z-2(d) of the Internal Revenue Code (Code); and (2) for the
Taxpayer to be treated as a QOF, effective as of Date 3, as provided under Code §
1400Z-2 and Treasury Regulation § 1.1400Z2(d)-1(a).

                                         FACTS

Taxpayer, a partnership organized as a limited liability company for U.S. tax purposes,
is a Qualified Opportunity Fund (QOF), formed on Date 4, for the exclusive purpose of
investing in “qualified opportunity zone property” as defined in Section 1400Z-2(d)(2).
The members of Taxpayer employed Advisor 1 to assist in forming and structuring
Taxpayer to meet the requirements under § 1400Z-2 and be a valid QOF. Taxpayer’s
LLC operating agreement states the Taxpayer’s intention to be a QOF and the need to
file certification forms in connection with that designation with Taxpayer’s federal
income tax returns.

For tax year Year 1, Taxpayer engaged Advisor 2 to prepare Form 7400 (Application for
Automatic Extension of Time to File Certain Business Income Tax, Information, and
Other Return) on Taxpayer’s behalf. Taxpayer’s Form 7004 was timely filed on Date 5,
extending the Taxpayer’s filing deadline to Date 6.

In Date 7, Taxpayer subsequently engaged a different firm, Advisor 3, to prepare its tax
year Year 1 federal income tax return and Form 8996 (Qualified Opportunity Fund) to
PLR-124266-20 3

self-certify and be treated as a QOF. Taxpayer represents that it reasonably believed
Advisor 3 had the requisite expertise to timely and completely fulfill its tax compliance
obligations as a QOF for Year 1 as Advisor 3 holds itself out to be an expert in assisting
taxpayers with Qualified Opportunity Zones.

According to the representations provided, Taxpayer, alongside Advisor 1, met with
Advisor 3 on Date 8 to discuss the QOF structure in connection with the preparation of
the Taxpayer’s Year 1 tax return. The meeting ended with Advisor 3 informing the
parties that it would contact Taxpayer and Advisor 1 if more information was needed
regarding the QOF structure of Taxpayer. Advisor 3 never requested additional
information.

Based on the facts and representations provided, Taxpayer reached out to Advisor 3
multiple times throughout the following months as to the status of its tax return. Despite
confirming that the return would be ready to be filed by the extended deadline, on Date
6, Advisor 3 contacted Taxpayer advising that the return should not be filed as there
were issues with Taxpayer’s structure as a QOF and was therefore not in compliance.
Advisor 3 recommended Taxpayer seek advice from an attorney. Taxpayer’s federal
income tax return and Form 8996 were not filed by the extended deadline.

Taxpayer represents that on Date 9, Taxpayer contacted Advisor 4 to consult on their
QOF structure. According to Taxpayer, Advisor 4 informed Taxpayer that their current
structure was eligible to be designated as a QOF and Advisor 3’s concerns were
unwarranted.

On Date 1, Taxpayer submitted this request asking for relief under Treasury Regulation
§§ 301.9100-1 and 301.9100-3. On the following day, Date 2, Taxpayer filed its federal
income tax return along with Form 8996 signifying its election to self-certify and be
treated as a QOF, effective as of Date 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 (including extensions) due to intervening events beyond the taxpayer’s control.
PLR-124266-20 4

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 failed to make the election because of intervening events
beyond the taxpayer’s control.

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)
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
PLR-124266-20 5

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's request for extension of time to elect to be a QOF and to self-
certify as a QOF is a regulatory election governed by Treasury Regulation § 301.9100-

3. We further conclude that, based on the facts and information submitted in connection
   with this request, Taxpayer has acted reasonably and in good faith, and that the
   granting of relief would not prejudice the interests of the government. Accordingly,
   Taxpayer has satisfied the requirements of the regulations for the granting of relief, and
   Taxpayer's Form 8996, filed on Date 2, certifying the Taxpayer as a QOF as of Date 3 is
   considered timely filed.

                                    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. In
addition, we have no opinion on whether Taxpayer’s return is considered timely filed or
whether Taxpayer’s Form 8996 is completed correctly. 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-124266-20 6

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 Chief Counsel
                                            (Income Tax & Accounting)

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