LLC's late qualified opportunity fund certification was treated as timely

Plain-English summary

An LLC formed as a qualified opportunity fund missed the deadline for its partnership return and Form 8996 after its accounting firm overlooked the extension filing. Investors had already contributed eligible gains and made their own deferral elections. The accounting firm later filed the return and Form 8996, then discovered that the self-certification was ineffective because the return was late. The LLC represented that relief would not reduce its tax liability. The IRS found reasonable reliance and no prejudice to the government, and treated the late Form 8996 as timely filed.

Ruling snapshot

• Question: May the LLC's late Form 8996 be treated as timely for QOF self-certification?
• Outcome: Approved
• Key authorities: IRC § 1400Z-2; Treas. Reg. §§ 1.1400Z2(d)-1 and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202526002 Third Party Communication: None
Release Date: 6/27/2025 Date of Communication: Not Applicable
Index Number: 1400Z.02-00, 9100.00-00
Person To Contact:
-----------------------, ID No. -----------------
------------------------ Telephone Number:
--------------------------------- ---------------------
--------------------------------------- Refer Reply To:
CC:ITA:B08
PLR-102025-25
Date:
March 27, 2025

                                                LEGEND
            Taxpayer                   =   ------------------------------------------------
            State                      =   ----------------
            Accounting Firm            =   -------------------------------
            Date 1                     =   -----------------------
            Date 2                     =   --------------
            Date 3                     =   ------------------
            Date 4                     =   ---------------------
            Date 5                     =   ---------------------
            Date 6                     =   --------------------------
            Date 7                     =   ---------------------
            Year                       =   -------

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

This ruling responds to Taxpayer’s request for a letter ruling dated Date 1. Specifically,
Taxpayer requests an extension of time under sections 301.9100-1 and 301.9100-3 of
the Procedure and Administration Regulations, to (1) make a timely election under
section 1.1400Z2(d)-1(a)(2)(i) to be certified as a qualified opportunity fund (QOF), as
defined in section 1400Z-2(d) of the Internal Revenue Code, and (2) for Taxpayer to be
treated as a Qualified Opportunity Fund (QOF), effective as of Date 2, as provided by
section 1400Z-2(d) and section 1.1400Z2(d)-1(a) of the Procedure and Administration
Regulations.
PLR-102025-25 2

                                     FACTS

According to the affidavits and additional information provided to us, Taxpayer has
represented that the facts are as follows. Taxpayer is a limited liability company
organized under the laws of State. Taxpayer is classified as a partnership for U.S.
Federal income tax purposes and was formed for the purpose of investing in qualified
opportunity zone property and serving as a QOF. Taxpayer’s annual accounting period
is the calendar year and uses the cash method of accounting. Taxpayer was formed on
Date 3. Year is the first year of Taxpayer’s operation and filing obligation.

Beginning in Date 2, individuals with membership interests in Taxpayer invested eligible
gains into Taxpayer and made the appropriate elections to defer such gains on their
related income tax returns. Taxpayer represents that all formative steps were correctly
undertaken to establish Taxpayer as a QOF and to capitalize Taxpayer using deferred
eligible gains for the purpose of investing in qualified opportunity zone property.

Accounting Firm had been engaged to satisfy tax compliance obligations for Taxpayer
for Year. Accounting Firm advised Taxpayer of the requirement to file Form 1065 and
Form 8996 for Year. Before Date 4, Accounting Firm timely filed Forms 7004 for
automatic extensions for various entities related to Taxpayer but inadvertently
overlooked Taxpayer’s extension and did not file a Form 7004 for Taxpayer’s Form
1065 and Form 8996.

On Date 5, Accounting Firm reviewed a list of related entities for which it was preparing
income tax returns for Year. Accounting Firm discovered that Taxpayer’s Year Form
1065 had not been extended. Accounting Firm promptly informed Taxpayer that its Year
Form 1065 had not been extended, and then proceeded to file it on Date 6 along with
Form 8996, which indicated that Taxpayer was self-certifying as a QOF beginning with
Date 2.

In Date 7, Accounting Firm determined that Taxpayer’s self-certification on Form 8996
was not effective because Taxpayer’s Year Form 1065 was not timely filed. Accounting
Firm informed Taxpayer of the issue and explained the possibility of requesting an
extension of time under section 301.9100-3 to file Form 8996 to self-certify as a QOF.
Taxpayer instructed Accounting Firm to prepare a private letter ruling request.

Taxpayer represents that granting of the relief under section 301.9100-3 will not result in
a lower tax liability for the years affected by the election.

                              LAW AND ANALYSIS

Section 1400Z-2(e)(4)(A) of the Internal Revenue Code 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.
PLR-102025-25 3

Section 1.1400Z2(d)-1(a)(2)(i) provides that the 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). The information provided indicates that Taxpayer did
not file its Form 1065 and Form 8996 by the due date of its federal income tax return
(including extensions) due to miscommunication between Accounting Firm and
Taxpayer.

Because section 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 section
301.9100-1(b).

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 section 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 section 301.9100-3(b), a taxpayer is deemed to have acted reasonably and in
good faith if the taxpayer requests relief before the failure to make the regulatory
election is discovered by the Service, or reasonably relied on a qualified tax
professional, and the tax professional failed to make, or advise the taxpayer to make,
the election. However, a taxpayer is not considered to have reasonably relied on a
qualified tax professional if the taxpayer knew or should have known that the
professional was not competent to render advice on the regulatory election or was not
aware of all relevant facts.

In addition, section 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 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

PLR-102025-25 4

   (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).

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 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, based solely on
the facts and information submitted, and the representations made in the ruling request,
Taxpayer has satisfied the requirements of the regulations for the granting of relief, and
Taxpayer’s late-filed Form 8996 for Year, filed Date 6, certifying Taxpayer as a QOF as
of Date 2, is considered timely filed.

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.

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
section 1.1400Z2(a)–1(b)(34) or whether the taxpayer meets the requirements under
section 1400Z-2 and the regulations thereunder to be a QOF. Further, we also express
no opinion on whether any interest owned by Taxpayer qualifies as qualified opportunity
zone property, as defined in section 1400Z(d)(2), or whether such interest 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
PLR-102025-25 5

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) of the Code
provides that it may not be used or cited as precedent.

In accordance with the Powers of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

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.

                                                Sincerely,




                                                Erika C. Reigle
                                                Acting Branch Chief, Branch 8
                                                Office of Associate Chief Counsel
                                                (Income Tax and Accounting)

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