9100 relief to file a late Form 8996 self-certifying a partnership as a Qualified Opportunity Fund

Plain-English summary

This letter grants a late-filing extension for an Opportunity Zone election. A Qualified Opportunity Fund (QOF) is an investment vehicle that lets investors defer and reduce capital-gains tax when they invest gains in designated low-income "opportunity zones." To become a QOF, an entity must self-certify by filing Form 8996 with a timely tax return. Here, a limited liability company taxed as a partnership was formed specifically to invest in opportunity-zone property, but its partners had no prior experience and did not know they had to file Form 8996; the return was filed without it. After the accountant later learned the entity intended to be a QOF and explained the requirement, the taxpayer requested relief. Because the taxpayer relied on a professional, was not shown to be using hindsight, and represented that the election would not lower its aggregate tax, the IRS found it acted reasonably and in good faith and granted 60 days to file an amended return with Form 8996, self-certifying as a QOF as of the intended first month. The IRS cautioned that this is not a ruling that the entity actually qualifies as a QOF.

Ruling snapshot

• Question: May the partnership get an extension of time to file a late Form 8996 self-certifying as a Qualified Opportunity Fund under IRC § 1400Z-2?
• Outcome: approved (60-day extension granted)
• Key authorities: Treas. Reg. §§ 301.9100-1, -3; IRC § 1400Z-2; Treas. Reg. § 1.1400Z2(d)-1(a)(2)(i)

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 202502004                                             Third Party Communication: None
Release Date: 1/10/2025                                       Date of Communication: Not Applicable
Index Number: 9100.00-00, 1400Z.02-00
                                                              Person To Contact:
---------------------------------------------                 ------------------------, ID No. -----------------
-----------------------------------------------               Telephone Number:
----------------------------                                  --------------------
-----------------------------                                 Refer Reply To:
                                                              CC:ITA:B08
                                                              PLR-109213-24
                                                              Date:
                                                              October 10, 2024




LEGEND

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

Month 1                       =        -----------------

Month 2                       =        --------------------------

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

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

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

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

Year 1                        =        ---------------------------------------------------------------------

State                         =        -------------

Managing Partner              =        ------------------------------

Certificate                   =        ---------------------------------------------------------------------

Accountant                    =        ------------------
PLR-109213-24                                        2

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

This letter responds to Taxpayer's request for a letter ruling dated Date 1. Taxpayer
requests relief under §§ 301.9100-1 and 301.9100-31 of the Procedure and
Administration Regulations, for an extension of time to file Form 8996, Qualified
Opportunity Fund, to self-certify as a qualified opportunity fund (QOF), as defined in
section 1400Z-2(d) of the Internal Revenue Code, effective as of Month 1, the first
month in which Taxpayer intended to be a QOF.

                                                FACTS

According to the information and representations provided, Taxpayer, a limited liability
company classified as a partnership for federal tax purposes, was formed on Date 2 in
State. As set forth in Taxpayer’s Certificate, Taxpayer was formed for the purpose of
investing in qualified opportunity zone property within the meaning of section 1400Z-
2(d)(2). Taxpayer’s partners including Managing Partner had no prior experience
investing in opportunity zone properties and had no knowledge of the requirement to
certify as a QOF by filing Form 8996, Qualified Opportunity Fund, on a timely filed tax
return.

After Taxpayer’s formation, the primary focus of its partners was to make capital
contributions to Taxpayer sufficient to invest in the intended opportunity zone property.
Following this initial investment, Taxpayer had very little business activity for the
remainder of Year 1.

In Month 2, Accountant commenced preparation of Taxpayer’s tax return for Year 1,
which was electronically filed on behalf of Taxpayer by Accountant on Date 3. Upon
subsequently learning that Taxpayer intended to be a QOF for Year 1, Accountant
informed Taxpayer of the requirements for self-certification as a QOF, including the
filing of Form 8996, Qualified Opportunity Fund, with Taxpayer’s timely-filed tax return.
Accountant advised Taxpayer that it could seek an extension of time to file the self-
certification election by submitting a private letter ruling request pursuant to § 301.9100-
1 and § 301.9100-3, which Taxpayer submitted on Date 4.

Taxpayer represents that the tax liabilities of Taxpayer and its investors would not be
lower in the aggregate for Year 1 and subsequent taxable years affected by the election
than if the election had been timely made (taking into account the time value of money).

                                       LAW AND ANALYSIS

Section 1400Z-2(e)(4) directs the Secretary to prescribe such regulations as may be
necessary to carry out the purposes of section 1400Z-2, including rules for the
certification of QOFs. Section 1.1400Z2(d)-1(a)(2)(i) of the Income Tax Regulations
1 Unless otherwise specified, all “section” references are to sections of the Internal Revenue Code (Code)

and all “§” references to sections of the Treasury Regulations (26 CFR Part 1) or (26 CFR Part 301).
PLR-109213-24                                3

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. The Form 8996
Instructions published pursuant to these regulations specify that to self-certify as a
QOF, a taxpayer must file Form 8996 with its tax return for the year to which the
certification applies by the due date of the tax return (including extensions).

Section 301.9100-3(a) of the Procedure and Administration Regulations 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 301.9100-3(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.

In addition, § 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).
PLR-109213-24                                 4


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)
of the regulations 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).

                                      CONCLUSION

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,
Taxpayer is granted 60 days from the date of this letter to file an amended Year 1 Form
1065 and accompanying Form 8996 to make an election under section 1400Z-2 and
section 1.1400Z2(d)-1(a)(2)(i) self-certifying the Taxpayer as a QOF as of Month 1.

                                         CAVEATS

The granting of an extension of time in this ruling letter is not a determination that
Taxpayer is otherwise eligible to self-certify as a QOF. See § 301.9100-1(a).

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.

Except as expressly provided herein, no opinion is either expressed or implied
concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. Specifically, we have no opinion, either express or implied,
concerning whether any investments made in Taxpayer are qualifying investments as
defined in § 1.1400Z2(a)-1(b)(34) or whether Taxpayer meets the requirements under
section 1400Z-2 and the regulations thereunder to be treated as a QOF. In addition, 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 Internal
Revenue 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.
PLR-109213-24                                           5

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. Taxpayers that have previously filed a return or administrative adjustment
requests attaching Form 8996 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 previous filing(s).

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.

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


                                               Sincerely,



                                               Frank W. Dunham III
                                               Senior Counsel, Branch 8
                                               (Income Tax & Accounting)


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