LLC gets 60 more days to self-certify as a Qualified Opportunity Fund after its accountant missed the filing

Plain-English summary

An LLC (taxed as a partnership) was formed to invest in Qualified Opportunity Zone
property, a program that lets investors defer and reduce tax on capital gains if
they invest through a Qualified Opportunity Fund (QOF). To become a QOF, the entity
must "self-certify" each year by attaching Form 8996 to its timely tax return. Here,
a miscommunication between the managing member and the accountant caused the
accountant to leave the LLC off its compliance list, so the Year 1 return and Form
8996 were never filed on time and no extension was requested. When the mistake was
found, the LLC hired a new accountant and asked the IRS for more time. Under
Treasury Regulation section 301.9100-3, the IRS grants relief when the taxpayer
acted reasonably and in good faith (including reasonable reliance on a tax
professional who dropped the ball) and relief will not lower the taxpayer's overall
tax. The IRS found both tests met and gave the LLC 60 days to file Form 8996. The
letter stresses it is only an extension to file the certification, not a ruling that
the entity actually qualifies as a QOF, and not an extension to file the Form 1065
partnership return.

Ruling snapshot

• Question: Should an LLC get an extension of time to file Form 8996 to self-certify as a Qualified Opportunity Fund after its accountant failed to file on time?
• Outcome: Approved (60-day extension granted)
• Key authorities: IRC § 1400Z-2; Treas. Reg. § 1.1400Z2(d)-1(a)(2)(i); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

 Internal Revenue Service                                         Department of the Treasury
                                                                  Washington, DC 20224

 Number: 202508004                                                Third Party Communication: None
 Release Date: 2/21/2025                                          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-112863-24
                                                                  Date:
                                                                  November 21, 2024

 LEGEND

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

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

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

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

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

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

 Managing Member               =        ------------------------

 LLC Agreement                 =        ----------------------------------------------------------------------------
                                        ----------------------------------------------------------------------------
                                        --------------------------

 Accountant 1                  =        -----------------------------------------------

 Accountant 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


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-112863-24                                2

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 for the purpose of investing in qualified opportunity zone property within the
meaning of section 1400Z-2(d). Neither Taxpayer nor Managing Member had prior
experience investing in opportunity zone properties.

The members of Taxpayer had previously retained Accountant 1 to prepare their federal
and state income tax returns and had sought guidance from Accountant 1 regarding
compliance with the rules for forming and operating a QOF. Taxpayer believed
Accountant 1 to be competent and sophisticated in handling federal income tax matters,
including the filing of federal income tax returns and self-certifications with respect to
QOFs. Taxpayer further believed that Accountant 1 would prepare Taxpayer's Year 1
return, including Form 8996. However, due to a miscommunication between Managing
Member and Accountant 1, Accountant 1 failed to include Taxpayer on its list of
compliance engagements. As a result, Taxpayer's Year 1 return with the requisite Form
8996 was not filed by the original due date, nor was an extension applied for.

Immediately upon discovering the miscommunication, Taxpayer retained Accountant 2
to prepare and file Taxpayer's requisite returns, as well as this ruling request for an
extension of time to self-certify as a QOF.

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
provides that the self-certification of a QOF must be timely-filed and effected 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
PLR-112863-24                                 3

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).

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).
PLR-112863-24                                 4

                                      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,
we grant Taxpayer an extension of 60 days from the date of this letter ruling to file a
Form 8996 to make the election to self-certify as a QOF under section 1400Z-2 and §
1.1400Z2(d)-1(a)(2)(i). The election must be made on a completed Form 8996 attached
to the Taxpayer's tax return. This letter ruling grants an extension of time to file a Form
8996. This letter ruling does not grant an extension of time to file Taxpayer's 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).

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).
PLR-112863-24                                           5


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
                                               (Income Tax & Accounting)


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