9100 relief to treat a late Form 8996 QOF self-certification as timely

Plain-English summary

A limited liability company, taxed as a partnership, was formed to be a qualified
opportunity fund (a "QOF"), the vehicle that lets investors defer capital gains by
investing in low-income "opportunity zones" under Code § 1400Z-2. To become a
QOF, the entity must self-certify by attaching Form 8996 to a timely filed tax
return. The company's CPA filed the partnership return on time but did not know
to include Form 8996, so the self-certification was never timely made. After
catching the error, the CPA filed an amended return with the Form 8996, and the
company asked the IRS for "9100 relief" (Treas. Reg. § 301.9100-3) to treat the
certification as timely. The IRS granted relief, finding the company reasonably
relied on its tax professional and acted in good faith, and that relief would not
prejudice the government. This matters because a preparer's omission of a required
form can be cured through 9100 relief, though the IRS took no position on whether
the entity actually qualifies as a QOF.

Ruling snapshot

• Question: May a partnership whose CPA omitted Form 8996 from a timely return get an extension of time to treat its QOF self-certification as timely?
• Outcome: approved (9100 relief granted; late Form 8996 treated as timely)
• 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: 202318006                                           Third Party Communication: None
 Release Date: 5/5/2023                                      Date of Communication: Not Applicable
 Index Number: 1400Z.02-00, 9100.00-00
                                                             Person To Contact:
                                                             ------------------------, ID No. -----------------
 ----------------------------------------------              Telephone Number:
 ---------------------------                                 --------------------
 --------------------                                        Refer Reply To:
 -------------------------------                             CC:ITA:B05
                                                             PLR-115254-22
                                                             Date:
                                                             February 06, 2023




                                                  LEGEND

                       Taxpayer     = ----------------------------------------------------------------------
                                      -------------
                       State        = -------------
                       Practitioner = -----------------
                       X            = ---
                       Date 1       = ------------------
                       Date 2       = -------------------------
                       Date 3       = --------------------------
                       Date 4       = ---------------------------
                       Date 5       = --------------
                       Year 1       = -------




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

This ruling responds to Taxpayer’s request for a letter ruling dated Date 1. Specifically,
Taxpayer requests an extension of time under sections 301.9100-1 and 301.9100-3 of
the Procedure and Administration Regulations, to (1) make a timely election under
section 1.1400Z2(d)-1(a)(2)(i) of the Income Tax Regulations to be certified as a
qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal
PLR-115254-22                                2

Revenue Code, and (2) for Taxpayer to be treated as a QOF, effective for its taxable
year ended Date 3, effective as of Date 2, as provided by section 1400Z-2(d) and
section 1.1400Z2(d)-1(a).

                                         FACTS

According to the affidavits and additional information provided to us, Taxpayer has
represented that the facts are as follows. Taxpayer is a limited liability company
organized under the laws of State and was formed on Date 2. Taxpayer is classified as
a partnership for U.S. federal income tax purposes and was formed for the purpose of
investing in qualified opportunity zone property and serving as a QOF.

Taxpayer engaged Practitioner to prepare the Year 1 Form 1065, U.S. Return of
Partnership Income. Neither Taxpayer nor Practitioner were aware of the necessity to
include Form 8996, Qualified Opportunity Fund, with Form 1065. Practitioner is a
licensed certified public accountant and has over X years of experience in public and
private accounting. Practitioner timely filed the Year 1 Form 1065, but did not include
Form 8996. As a result, Taxpayer failed to file its Federal income tax return and Form
8996 by the due date, and consequently, the election to self-certify as a QOF on the
Form 8996 was not timely made.

A few months later, upon discovering that Taxpayer’s Year 1 Form 1065 and
accompanying election had not been timely filed, Practitioner filed an amended Year 1
Form 1065 and Form 8996. Taxpayer then filed this request for relief.

                                  LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) of the Internal Revenue Code directs the Secretary to
prescribe regulations for 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 , 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 Practitioner did
not file Taxpayer’s Form 8996 because neither Taxpayer’s partner representative nor
Practitioner were aware of the requirement.

Because section 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 section
301.9100-1(b).
PLR-115254-22                                 3


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 section 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
PLR-115254-22                                  4

made, are closed by the period of limitations on assessment under section 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. A partner representative of
Taxpayer relied on Practitioner to prepare Taxpayer’s Year 1 tax returns. However,
neither were aware of the requirement to attach the Form 8996 to the timely-filed Form
1065. Accordingly, based solely on the facts and information submitted, and the
representations made in the ruling request, Taxpayer has satisfied the requirements of
the regulations for the granting of relief and Taxpayer's Form 8996, filed on Date 5, is
considered timely filed.

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.

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
section 1.1400Z2(a)-1(b)(34) or whether Taxpayer meets the requirements 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.

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.

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

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
PLR-115254-22                               5



attaching a statement to their return that provides the date and control number of the
letter ruling.




                                         Sincerely,



                                         Amy J. Pfalzgraf
                                         Branch Chief (Acting), Branch 5
                                         Office of Associate Chief Counsel
                                         (Income Tax and Accounting)




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