Late-filed Form 8996 treated as timely, self-certifying an LLC as a Qualified Opportunity Fund

Plain-English summary

An LLC taxed as a partnership was organized to be a Qualified Opportunity Fund (QOF), a structure that gives investors capital-gains tax benefits for investing in designated opportunity zones. To become a QOF it had to self-certify by filing Form 8996 with a timely tax return, but its partnership return (Form 1065) for the first year was filed late, so the Form 8996 was late too. The LLC asked the IRS for relief under the § 301.9100-3 regulations, which allow a missed election deadline to be excused when the taxpayer acted reasonably and in good faith and relief will not prejudice the government. The IRS agreed and treated the late Form 8996 as timely, so the entity is self-certified as a QOF for the first year. The IRS stressed it was not deciding whether any investments actually qualify, or whether the entity truly meets QOF requirements, and it did not excuse any late-filing penalties on the return itself. This is useful to anyone whose opportunity-zone fund missed its certification because a return was filed late.

Ruling snapshot

• Question: Should a late-filed Form 8996 be treated as timely so an LLC can self-certify as a Qualified Opportunity Fund?
• Outcome: approved
• 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: 202451008                                         Third Party Communication: None
 Release Date: 12/20/2024                                  Date of Communication: Not Applicable
 Index Number: 9100.00-00, 1400Z.02-00
                                                           Person To Contact:
 -------------------------                                 ---------------------, ID No. -----------------
 -----------------------                                   Telephone Number:
 ------------------------                                  --------------------
 -----------------------------                             Refer Reply To:
 In Re:                                                    CC:ITA:B04
                                                           PLR-106071-24
                                                           Date:
                                                           September 23, 2024


                                                LEGEND

 Taxpayer = ----------------------------------------------------------------------------------------------
            ------------------------
 State Z  = -------------
 Tax Year = ------------------
 Month A = ---------------------
 Year 1   = -------
 Date 1   = --------------------------
 Date 2   = -----------------------
 Date 3   = ---------------------



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


This letter responds to Taxpayer’s request, dated Date 3. Specifically, Taxpayer
requests an extension of time, under §§ 301.9100-1 and 301.9100-3 of the Procedure
and Administration Regulations, to file Taxpayer’s Form 8996, Qualified Opportunity
Fund, for purposes of making the election for Year 1, under § 1.1400Z2(d)-1(a)(2)(i) of
the Income Tax Regulations, to: (1) self-certify Taxpayer as a qualified opportunity fund
(“QOF”), as defined in § 1400Z-2(d) of the Internal Revenue Code; and (2) be treated as
a QOF, effective as of the Month A (the month Taxpayer formed), under § 1400Z-2(d)
and § 1.1400Z(d)-1(a).1

This letter ruling is being issued electronically in accordance with Rev. Proc. 2024-1,
2024-1 I.R.B. 1. A paper copy will not be mailed to Taxpayer.


1 Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code

or the Treasury Regulations (26 CFR Part 1) or (26 CFR Part 301) as applicable.

                                         FACTS

Based on the provided information and representations, we understand the following
facts. Taxpayer was organized, on Date 1, as a limited liability company, under the
laws of State Z and is classified as a partnership for federal income tax purposes.
Taxpayer uses the cash method of accounting and has a taxable year end of Tax Year.

According to Taxpayer’s operating agreement, Taxpayer was organized for the purpose
of qualifying as a QOF and investing indirectly in qualified opportunity zone property as
defined in § 1400Z-2(d)(2). Taxpayer represents that it is eligible to make an election to
be recognized as a QOF for Year 1.

Due to a set of circumstances, Taxpayer’s Year 1 Form 1065, U.S. Return of
Partnership Income was not timely filed. Consequently, Taxpayer’s Form 8996 was not
timely filed for Year 1.

                                  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)(i) of the regulations 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 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) for the year to which the certification applies.
Taxpayer failed to file the Form 8996 by the due date of its Year 1 and Year 2 federal
income tax return.

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.

Section 301.9100-1(b) defines the term “regulatory election” as including any election
whose due date is prescribed by a regulation published in the Federal Register. 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 § 301.9100-1(b).

Section 301.9100-3(b)(1) provides that a taxpayer is deemed to have acted reasonably
and in good faith if the taxpayer—

      (i) requests relief before the failure to make the regulatory election is discovered
      by the Service;

      (ii) failed to make the election because of intervening events beyond the
      taxpayer's control;

      (iii) failed to make the election because, after exercising reasonable diligence,
      the taxpayer was unaware of the necessity for the election;

      (iv) reasonably relied on the written advice of the Service; or

      (v) reasonably relied on a qualified tax professional, and the professional failed to
      make, or advise the taxpayer to make, the election.

Section 301.9100-3(b)(3) provides a taxpayer will not be considered 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 a 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 § 6501(a) before the taxpayer's receipt of a
ruling granting relief under this section.

Taxpayer represents that Taxpayer has acted reasonably and in good faith.
Additionally, Taxpayer also represents that none of the circumstances listed in
§ 301.9100-3(b)(3) apply.

                                      CONCLUSION

Based solely on the facts and information submitted and the representations made in
connection with this ruling request, 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, the Form 8996 attached to Taxpayer’s Year 1 federal
income tax return, filed on Date 2, 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.

                                        CAVEATS

This ruling is based upon facts and representations submitted by Taxpayer and
accompanied by a penalty of perjury statement 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 § 301.9100-3 relief as applied to the election to
self-certify Taxpayer as an QOF by filing Form 8996 for Year 1 and does not address
any penalty or related issues due to Taxpayer’s failure to timely file an income tax return
for Year 1. Specifically, we have no opinion, neither express nor implied, concerning
whether any investments made into Taxpayer are qualifying investments as defined in
§ 1.1400Z-2(a)-1(b)(34), or whether Taxpayer met or meets the requirements under
§ 1400Z-2 and the regulations thereunder to be a QOF. Further, we express no opinion
on whether any interest indirectly owned by Taxpayer qualifies as qualified opportunity
zone property, as defined in § 1400Z-2(d)(2), or whether the indirect interest would be
treated as a qualified opportunity zone business, as defined in § 1400Z-2(d)(3). Nor do
we express any opinion regarding the tax treatment of the instant transaction under the
provisions of any other sections of the Internal Revenue Code or Treasury 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) 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 § 6110.

In accordance with the Form 2848, Power of Attorney and Declaration of
Representative, on file with this office, a copy of this letter is being sent to Taxpayer’s
authorized representatives.


                                                   Sincerely,




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

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