Partnership received 60 days to self-certify as an opportunity fund

Plain-English summary

A partnership formed to invest in qualified opportunity zones did not timely file its first Form 1065 or attach Form 8996 to self-certify as a qualified opportunity fund. Its manager believed an accounting firm would handle the compliance work, but internal staff turnover prevented the firm from learning that the partnership was intended to be a QOF. The partnership sought relief promptly after the omission was discovered and before the IRS found it. The IRS concluded that the partnership reasonably relied on a qualified tax professional and granted 60 days to attach a completed Form 8996 to its first-year return. The ruling grants only filing relief and does not decide whether the investments, the partnership, or its underlying entities satisfy the substantive opportunity-zone requirements.

Ruling snapshot

• Question: May the partnership receive additional time to file Form 8996 and self-certify as a qualified opportunity fund?
• Outcome: Approved, with a 60-day extension
• 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: 202511008 Third Party Communication: None
Release Date: 3/14/2025 Date of Communication: Not Applicable
Index Number: 1400Z.02-00, 9100.00-00
Person To Contact:
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-------------------------------- Telephone Number:
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------------------------------------ Refer Reply To:
CC:ITA:B05
PLR-111769-24
Date:
December 17, 2024

                                               LEGEND

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

                       Firm              = ---------------------------------------------------------
                       State             = --------------
              Date 1            = -----------------
                       Date 2            = ------------------
                       Date 3            = -------------------
                       Year 1            = -------
                       Year 2            = -------
                       Manager           = ---------------------------------------------------
                       Advisor           = --------------------------
                       Entity 1          = -------------------------------------
                       Entity 2          = --------------------------------------------------------------------
                                         -------------
                       N1                = ----
                       N2                = ------
                       N3                = ---------

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

This responds to Taxpayer’s request received by the Service on Date 3, for relief under
§§ 301.9100-1 and 301.9100-3 of the Procedure and Administration Regulations to file
Form 8996, Qualified Opportunity Fund. Specifically, Taxpayer requests that the Internal
Revenue Service (Service) grant an extension of time to make an election under §
1400Z-2 of the Internal Revenue Code and § 1.1400Z2(d)-1(a)(2) of the Income Tax
Regulations to self-certify as a qualified opportunity fund (QOF), effective as of Date 2.
PLR-111769-24 2

                                         FACTS

Taxpayer has represented that the facts are as follows:

Taxpayer is a limited liability company organized under the laws of State on Date 1.
Taxpayer uses the calendar year as its taxable year and uses the cash method of
accounting. For purposes of federal income taxation, Taxpayer is treated as a partnership.
Taxpayer is owned by Entity 1 and Entity 2, who each own N1% and N2% respectively.
Manager is the N3% owner of both Entity 1 and Entity 2.

Taxpayer was formed for the purpose of making investments in Qualified Opportunity Zones
and operating as a QOF as defined in § 1.1400Z2(d)-(1) of the Income Tax Regulations.
Pursuant to the operating agreement, entered into by Entity 1 and Entity 2 on Date 2,
Taxpayer is managed by Manager. Manager, on behalf of Taxpayer, requested this ruling.

Taxpayer’s submission and request for a ruling includes an affidavit from Manager.
Manager indicates that, when forming Taxpayer, he was unaware that Form 8996 was
required to be filed with Taxpayer’s timely filed Year 1 income tax return in order to make a
valid QOF election for that year.

Manager believed that Firm would assist Entity 1 and Entity 2’s internal legal and
accounting team with the completion of all tax compliance obligations for the Taxpayer,
including filing the required returns and forms to qualify Taxpayer as a QOF.

In Year 1, Entity 1 and Entity 2 executed the operating agreement and invested eligible
gains into the Taxpayer. Taxpayer then invested the funds in qualified opportunity zone
property in State, with the intent for the Taxpayer to be a QOF. Shortly after the Taxpayer
invested in the qualified opportunity zone property, the internal accounting team
experienced a turnover in leadership.

As a result of the turnover, the internal accounting team failed to communicate to Firm that
the Taxpayer was intended to be a QOF. As such, Firm failed to recognize there was a filing
requirement and did not file the Taxpayer’s Year 1 Form 1065, U.S. Return of Partnership
Income, nor attach a Form 8996, Qualified Opportunity Fund, to a timely filed first year
return.

In Year 2, Firm reviewed the Taxpayer’s records and had some questions regarding the
Taxpayer’s structure. Firm also asked Advisor to review the documents. At this time, the
Manager learned from Firm that the Taxpayer was supposed to have timely filed a
partnership return for Year 1 with an attached Form 8996 in order to self-certify as a QOF.
The Taxpayer immediately engaged Advisor to prepare this private letter ruling request.

Taxpayer indicates that as of the date it submitted its private letter ruling request to this
office, the Service had not discovered Taxpayer’s failure to timely self-certify itself as a
QOF, effective Date 2.
PLR-111769-24 3

                                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) 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
an entity electing to be certified as a QOF must do so annually on a timely filed return 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).

Because § 1.1400Z2(d)-1(a)(2)(i) sets forth the manner and timing for an entity to self-
certify as a QOF, these elections are regulatory elections, as defined in § 301.9100-1(b) of
the Procedure and Administration Regulations.

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.

Under § 301.9100-3(b) , a taxpayer is deemed to have acted reasonably and in good faith if
the taxpayer makes a request for an extension of time before the Service discovers the
taxpayer's failure to make the regulatory election, 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. A taxpayer may alternatively demonstrate that he acted reasonably and in good
faith if he relied upon a qualified tax professional and the tax professional failed to make, or
advise the taxpayer to make, the election.

Under § 301.9100-3(b)(3), 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.

PLR-111769-24 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) 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 § 301.9100-3.

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 will not
prejudice the interests of the government. Taxpayer reasonably relied on a qualified tax
professional, and the tax professional failed to timely make, or advise the taxpayer to make,
the election. Accordingly, 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 section 1.1400Z2(d)-1(a)(2)(i). The election must be made on a completed
Form 8996 attached to the Taxpayer’s tax return for Year 1. This letter ruling grants an
extension of time to file a Form 8996.

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 §
1.1400Z2(a)-1(b)(34) or whether Taxpayer meets the requirements under section 1400Z-2
and the regulations thereunder to be a QOF. We express no opinion on whether any
interest in any entity owned 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 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.
PLR-111769-24 5

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 Taxpayer's authorized representative.

                                         Sincerely,



                                         Kyle C. Griffin
                                         Senior Counsel, Branch 5
                                         Office of Associate Chief Counsel
                                         (Income Tax and Accounting)

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