Partnership’s late Form 8996 was treated as a timely qualified opportunity fund election

Plain-English summary

A married couple formed a partnership to operate as a qualified opportunity fund but misunderstood counsel’s explanation of the entity’s tax-filing obligations. They believed the fund’s activity would be reported on their joint individual return and did not timely file the partnership’s Form 1065 or attached Form 8996. After learning that separate filings were required, they promptly hired a CPA, filed both forms late, and obtained penalty abatement, but later discovered that abatement did not make the QOF self-certification timely. The IRS concluded that the partnership acted reasonably and in good faith and that relief would not prejudice the government. It treated the previously filed Form 8996 as timely and recognized the partnership’s election to self-certify as a QOF beginning in the month it was formed. The ruling does not decide whether the partnership or its investments otherwise satisfy the opportunity-zone requirements.

Ruling snapshot

• Question: Should the partnership’s late Form 8996 be treated as a timely election to self-certify as a qualified opportunity fund?
• Outcome: Approved
• Key authorities: IRC § 1400Z-2; Treas. Reg. §§ 1.1400Z2(d)-1(a)(2), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202515005 Third Party Communication: None
Release Date: 4/11/2025 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:B04
PLR-113161-24
Date:
January 16, 2025

                                                LEGEND

Taxpayer = ---------------------------------------------------------
Managers = -----------------------------------------------------------------
Date 1 = ----------------------
Date 2 = ---------------------------
Date 3 = -------------------
Month 1 = -----------------
Month 2 = -------------
Year 1 = -------
Year 2 = -------
Tax Counsel = ----------------------
Advisor = -----------------------------
State Z = --------

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

    This letter responds to Taxpayer’s request dated Date 3. Specifically, Taxpayer

requests a private letter ruling granting relief pursuant to Treas. Reg. §§ 301.9100-1 and
301.9100-3 of the Procedure and Administration Regulations. Specifically, Taxpayer
requests an extension of time for its late-filed Form 8996, Qualified Opportunity Fund, to
be treated as timely for purposes of making the election to (1) self-certify Taxpayer as a
qualified opportunity fund (QOF), as defined in section 1400Z-2(d) of the Internal
Revenue Code (Code) for Year 1; and (2) to be treated as a QOF, effective as of Month
PLR-113161-24 2

1, as provided under § 1400Z-2(d) and section 1.1400Z2(d)-1(a) of the Income Tax
Regulations.

  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.

                                     FACTS

   According to the representations made and additional information provided,

Taxpayer is a limited liability company organized under the laws of State Z on Date 1
and classified as a partnership for Federal income tax purposes.

   The operating agreement of Taxpayer states that Taxpayer was formed for the

purposes of qualifying as a QOF and of investing in Qualified Opportunity Zone Property
as defined in § 1400Z-2(d)(2). Taxpayer elected out of the centralized partnership audit
regime under § 6221 of the Code for Year 1. Taxpayer uses the cash method of
accounting and has a calendar tax year end.

   Taxpayer is owned and managed by Managers, a married couple, neither of

whom have a background in tax law. Managers engaged Tax Counsel to assist in the
organization of Taxpayer due to Tax Counsel’s familiarity with qualified opportunity zone
issues. In connection with this engagement, Tax Counsel explained the tax filing
requirements for a QOF. However, Managers did not understand the explanation or
terminology used, and further, were not aware that they had misunderstood. Instead,
Managers erroneously believed that because Taxpayer was owned by themselves as a
married couple, all activity related to Taxpayer would be reportable on Managers’ jointly
filed Year 1 Form 1040, U.S. Individual Income Tax Return.

  Subsequently in Month 2, Managers met with Tax Counsel again to discuss the

Taxpayer’s progress, as well as the relevant tax requirements. As a result of this
meeting, Managers ultimately realized that Taxpayer was required to file, for Year 1, a
Form 1065, U.S. Return of Partnership Income, and to include a Form 8996. Managers
immediately engaged Advisor, a certified public accountant, to assist with satisfying
Taxpayer’s Federal income tax filing requirements for Year 1. Advisor confirmed to
Managers that Taxpayer’s Year 1 tax-filing obligations required Taxpayer to timely file a
Form 1065 with a Form 8996 attached. Additionally, Advisor informed Managers that
the due date for Taxpayer’s Year 1 Form 1065, as well as the deadline to file a timely
Form 7004, Application for Automatic Extension of Time To File Certain Business
Income Tax, Information, and Other Returns, had elapsed. On Date 2, Advisor late-filed
Taxpayer’s Year 1 Form 1065 and Form 8996.

 Taxpayer subsequently applied to the IRS for abatement of penalties for

Taxpayer’s late Year 1 return and later received such abatement. Upon being granted
PLR-113161-24 3

the penalty abatement, Managers erroneously believed that Taxpayer’s tax issue had
been resolved. Later, Managers again met with Tax Counsel for a compliance review
on their qualified opportunity zone project and were informed by Tax Counsel that the
Year 1 Form 8996 was not effective because of its late filing and that Taxpayer had,
thus, not timely self-certified as a QOF. Taxpayer then engaged Tax Counsel to file for
this relief.

                              LAW AND ANALYSIS

    Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for the

certification of QOFs.

   Section 1.1400Z2(d)-1(a)(2)(i) 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 (Commissioner) in the Internal Revenue Service
(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). The information provided indicates that Taxpayer
did not file its Form 8996 by the due date of its income tax return due to Managers’
mistaken belief that a separate Year 1 tax return was not required to be filed for
Taxpayer.

   Because Treas. Reg. § 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 Treas. Reg. § 301.9100-3(b)(1).

   Sections 301.9100-1 through 301.9100-3 provides the standards the Service 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 changes covered in Treas. Reg. § 301.9100-2) will be
granted when the taxpayer acted reasonably and in good faith and granting 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;

PLR-113161-24 4

   (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.

   Under Treas. Reg. § 301.9100-3(b)(3), 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 could
          be imposed under section 6662 at the time the taxpayer requests relief
          and the new position requires a regulatory election for which relief is
          requested;
   (ii)   Was fully informed of the required election and related tax consequences,
          but chose not to file 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) provides that the Commissioner will grant a reasonable

extension of time only when the interests of the Government will not be prejudiced by
the granting of relief.

    Section 301.9100-3(c)(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).

   Additionally, Treas. Reg. § 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.

                                  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, Taxpayer has
satisfied the requirements of the regulations for the granting of relief, and the Form 8996
attached to Taxpayer’s tax return for Year 1, filed on Date 2, is considered timely filed.
Taxpayer has thereby made the election under § 1400Z-2 and Treas. Reg. §
1.1400Z2(d)-1(a)(2)(i) to self-certify as a QOF as of Month 1, the month in which
Taxpayer was formed.
PLR-113161-24 5

    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.

    This ruling addresses the granting of Treas. Reg. § 301.9100-3 relief as applied

to the election to self-certify Taxpayer as a QOF by filing Form 8996 for Year 1. 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 have no opinion, either express or implied, concerning whether
any investments made into Taxpayer are qualifying investments as defined in Treas.
Reg. § 1.1400Z2(a)-1(b)(34) or whether Taxpayer meets the requirements under §
1400Z-2 and the regulations thereunder to be a QOF. Further, we also express no
opinion on whether any interest owned in any entity owned by Taxpayer qualifies as
qualified opportunity zone property, as defined in § 1400Z-2(d)(2), or whether such
entity would be treated as a qualified opportunity zone business, as defined in § 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 directed only to the taxpayer requesting it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

    A copy of this letter must be attached to any income 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. Additionally, 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 Taxpayer’s Year 1 return.
PLR-113161-24 6

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your authorized representatives.

                                       Sincerely,




                                       Alexa T. Dubert
                                       Senior Technician Reviewer
                                       Branch 4
                                       Office of Associate Chief Counsel
                                       (Income Tax & Accounting)

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