Opportunity fund received more time to file its omitted self-certification

Plain-English summary

A partnership-taxed limited liability company was formed to operate as a qualified opportunity fund. Its accountant prepared both the company's partnership return and Form 8996 for self-certification, but a clerical error caused the accountant to omit Form 8996 from the return. The accountant notified the company immediately after discovering the error, and the company sought an extension. The IRS found that the company acted reasonably and in good faith and that relief would not prejudice the government. It granted 60 days to file Form 8996 with an amended return or administrative adjustment request, without deciding whether the company or its investments satisfied the substantive opportunity-zone requirements.

Ruling snapshot

• Question: Could the company receive more time to make its qualified-opportunity-fund self-certification after its prepared Form 8996 was accidentally omitted from its return?
• Outcome: approved, with 60 days to file Form 8996
• Key authorities: IRC § 1400Z-2; Treas. Reg. §§ 1.1400Z2(d)-1(a), 301.9100-1, and 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202401017                                             Third Party Communication: None
 Release Date: 1/5/2024                                        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:B08
                                                               PLR-109814-23
                                                               Date:
                                                               October 05, 2023




Legend

Taxpayer         = -----------------------------------------------------
Accountant       = ------------------
Date 1           = ----------------
Date 2           = -------------------
Date 3           = ---------------------------
Date 4           = --------------------------
Month 1          = ---------------------
State Z          = -------------

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

This letter responds to Taxpayer’s request for a letter ruling dated Date 1. Specifically,
Taxpayer requests relief under sections 301.9100-1 and 301.9100-3 of the Procedure
and Administration Regulations, for an extension of time 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
Revenue Code (Code) and (2) for Taxpayer to be treated as a QOF, effective as of Date
2, as provided by section 1400Z-2(d) and section 1.1400Z2(d)-1(a).

                                                     FACTS

Taxpayer is a limited liability company, organized under the laws of State Z on Date 3.
Taxpayer is treated as a partnership for Federal income tax purposes and was formed
for the purpose of investing in qualified opportunity zone property serving as a QOF.
Taxpayer uses the cash method of accounting and has a tax year end date of Date 4.

PLR-109814-23                                 2

According to the affidavits and information provided, Taxpayer engaged Accountant to
prepare Taxpayer’s Form 1065, U.S. Return of Partnership Income, for the short tax
year of Date 2 through Date 4. Taxpayer and Accountant were, at the time, both aware
of Taxpayer’s intent to be a QOF and of the requirement to file a Form 8996, Qualified
Opportunity Fund, for the Taxpayer to self-certify its QOF status and to be treated as a
QOF. Further, both were aware that the Form 8996 needed to be attached to
Taxpayer’s initial Form 1065 in order to self-certify as a QOF.

Accountant prepared Taxpayer’s Form 1065. It also prepared the Form 8996 and
intended to file it contemporaneously with the Form 1065. However, due to a clerical
error, Accountant failed to attach the prepared Form 8996 to Taxpayer’ s federal tax
return. Immediately upon discovery of the inadvertent error, Accountant informed
Taxpayer of the error. Taxpayer and Accountant discussed what actions, if any, must be
taken in connection with Taxpayer’s certification as a QOF for Year 1. In Month 1,
Manager, on behalf of the Taxpayer, engaged Accountant to prepare a private letter
ruling.

Taxpayer represents that granting relief under section 301.9100-3 of the Procedure and
Administration Regulations will not result in a lower tax liability for the year affected by
the election.

                                  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 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 Federal income tax return (including extensions). The
information provided indicates that Accountant did not file Taxpayer’s Form 8996 due to
Accountant’s clerical error.

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 section 301.9100-3(a), requests for
extensions of time for regulatory elections that do not meet the requirements of section
301.9100-2 (automatic extensions) must be made under the rules of section 301.9100-

3. Additionally, requests for relief subject to section 301.9100-3 will be granted when
the taxpayer provides evidence to establish that the taxpayer acted reasonably and in

PLR-109814-23                                  3

good faith, and that the granting 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 failed to make the election because, after
exercising reasonable diligence (taking into account the taxpayer’s experience and the
complexity of the return or issue), the taxpayer was unaware of the necessity for the
election.

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 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. 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

PLR-109814-23                                  4

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

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 the taxpayer meets the requirements under
section 1400Z-2 and the regulations thereunder to be a QOF. Further, we also express
no opinion on whether any interest owned in any entity by Taxpayer qualifies as
qualified opportunity zone property, as defined in section 1400Z-2(d)(2), or whether
such entity would be treated as a qualified opportunity zone business, as defined in
section 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.

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

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.


                                       Sincerely,

                                       Shareen S. Pflanz
                                       Branch Chief, Branch 8
                                       Office of Associate chief Counsel
                                       (Income Tax & Accounting)

PLR-109814-23                             5

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