9100 relief for a late Form 8996 self-certifying a Qualified Opportunity Fund

Plain-English summary

A taxpayer set up an entity to be a Qualified Opportunity Fund (QOF), the vehicle that lets investors defer and reduce tax on capital gains reinvested in designated low-income areas. To become a QOF, the entity must self-certify by attaching Form 8996 to a timely filed return. The taxpayer's accounting firm prepared the first-year partnership return but failed to include the Form 8996, so no self-certification happened on time. After discovering the omission, the taxpayer engaged new advisers, filed an amended return with Form 8996 attached, and asked the IRS for an extension of time under Treasury Regulation section 301.9100-3. The IRS found the taxpayer reasonably relied on its accounting firm, acted in good faith, and that relief would not prejudice the government. It treated the Form 8996 on the amended return as timely, so the entity is self-certified as a QOF for that year. The IRS did not decide whether the entity actually meets the substantive QOF requirements.

Ruling snapshot

• Question: May a fund whose accountant left Form 8996 off its return get an extension of time to 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: 202505017
Release Date: 1/31/2025                                    Person To Contact:
                                                           -----------------------, ID No. -----------------
Index Number: 9100.00-00, 1400Z.02-00                      Telephone Number:
                                                           --------------------
-----------------                                          Refer Reply To:
--------------------------                                 CC:ITA:B08
--------------------------                                 PLR-113073-24
--------------                                             Date:
--------------------------------                           November 05, 2024




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

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

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

Month 3                       =    --------------------

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

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

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

Year 2                        =    ---------------------------------------------------------------------

Year 3                        =    ---------------------------------------------------------------------

Year 4                        =    -------

Accounting Firm 1             =    --------------------------------------------------------

Accounting Firm 2             =    ---------------------------------

Law Firm                      =    ---------------------
PLR-113073-24                                        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 for an extension of time to file
Form 8996, Qualified Opportunity Fund, to self-certify as a qualified opportunity fund, as
defined in section 1400Z-2(d) (QOF), 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 in Month 1 for
the purposes of being a QOF and investing in qualified opportunity zone property.

Taxpayer represents that it intended to elect to be a QOF beginning in Month 1, the first
month of Year 1. Taxpayer worked with Accounting Firm 1 to ensure that Taxpayer
would meet the requirements of a QOF. Accounting Firm 1 prepared the Year 1 tax
return for Taxpayer while being aware that Taxpayer intended to elect to be a QOF.
Taxpayer relied on Accounting Firm 1 to prepare a complete and accurate tax return for
Taxpayer, but, despite this, Accounting Firm 1 did not prepare and attach the QOF
election to Taxpayer’s timely filed Year 1 tax return.

Taxpayer represents that in Month 2, Taxpayer engaged Accounting Firm 2 to prepare
and file a Year 2 tax return for Taxpayer. During the transition from Accounting Firm 1 to
Accounting Firm 2, Accounting Firm 2 was unable to acquire all previous files and
necessary information from Accounting Firm 1. Accounting Firm 2 was not aware at the
time of filing and preparing Taxpayer’s Year 2 tax return that Taxpayer was meant to be
a QOF. Accounting Firm 2 relied on the Year 1 return prepared by Accounting Firm 1
and believed it contained all relevant information. Accounting Firm 2 also prepared and
timely filed the income tax returns for all interested parties for Year 3, still unaware that
Taxpayer was intended to be a QOF.

In late Year 4, Accounting Firm 2 investigated the facts related to Taxpayer’s Year 1
return and the failure to include the required Form 8996 to self-certify as a QOF. After
confirming that Taxpayer was intended from the beginning to be a QOF, Accounting
Firm 2 began researching the effect of failure to properly make the QOF election on
Form 8996. Taxpayer decided to hire Law Firm, and Taxpayer connected Accounting
Firm 2 with tax counsel at Law Firm in Month 3 to determine the availability of relief to
preserve Taxpayer’s original intent for Taxpayer to be a QOF. This resulted in a letter
ruling request for the Taxpayer to be granted an extension of time to file Form 8996,
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-113073-24                                  3

Qualified Opportunity Fund, to self-certify as a QOF. On Date 2, Taxpayer filed an
administrative adjustment request for Year 1 to file Form 8996 to self-certify as a QOF.

Taxpayer further 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 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. 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 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) of the regulations 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.
PLR-113073-24                                 4

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).

Section 301.9100-3(c)(1) of the regulations 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

The information and representations provided indicates that Taxpayer did not file its
Form 8996 by the due date of its income tax return for Year 1 due to Taxpayer’s
reasonable reliance on Accounting Firm 1’s failure to include the Form 8996 with
Taxpayer’s Form 1065. Based on the information provided, including affidavits and
representations under penalties of perjury, we conclude that Taxpayer has acted
reasonably and in good faith, and that granting a reasonable extension of time for
Taxpayer to file Form 8996 will not prejudice the interests of the Government.
Consequently, the Form 8996 attached to Taxpayer’s amended Form 1065 for Year 1,
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 amended Form 1065.

                                         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).
PLR-113073-24                                 5

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.

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.



                                                  Sincerely,



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