Private Letter Ruling   
Number: 202306003   
Internal Revenue Service   
November 9, 2022   
     
     
     
Internal Revenue Service   
Department of the Treasury   
Washington, DC 20224   
     
Number: 202306003   
Release Date: 2/10/2023   
Index Number: 1400Z.02-00, 9100.00-00     
[Third Party Communication:   
Date of Communication: Month DD, YYYY]   
Person To Contact:   
ID No.   
Telephone Number:   
Refer Reply To:   
CC:ITA:B04   
PLR-109640-22   
Date:  November 09, 2022   
     
Dear ******:     
     
This responds to Taxpayer's request dated April 29, 2022. Specifically, Taxpayer requests relief under Treasury Regulation §§ 301.9100-1 and 301.9100-3 granting an extension of time to make a timely election under Treasury Regulation § 1.1400Z-2(a)-1(a)(2)(i) to be certified as a Qualified Opportunity Fund (QOF), as defined in § 1400Z-2(d) of the Internal Revenue Code (Code).   
     
This letter ruling is being issued electronically in accordance with Rev. Proc. 2020-29, 2020-21 I.R.B. 859. A paper copy will not be mailed to Taxpayers.   
     
FACTS   
     
Taxpayer was organized as a limited liability company under the laws of State on Date 1 and it is classified as a partnership for federal income tax purposes. On Date 2, Taxpayer adopted a resolution to its operating agreement stating that the purpose of Taxpayer is to act as a Qualified Opportunity Fund and invest in a Qualified Opportunity Zone Business. Shortly thereafter, Taxpayer made an investment to acquire Qualified Opportunity Zone Property as defined in Code §1400Z-2(d)(2). Taxpayer's Manager retained Tax Advisor, a qualified tax advisor, to file Taxpayer's Form 1065 for the Year 1. Tax Advisor has multiple years of experience in both public and private accounting and has a high level of expertise for tax reporting. Manager does not have tax expertise and represents that he relied on Tax Advisor, who he believed had a high level of expertise in tax preparation and reporting.   
     
It has been represented that, at the time Tax Advisor was retained, Tax Advisor was made aware of Taxpayer's desire and intent to self-certify as a Qualified Opportunity Fund at the time of filing Taxpayer's Year 1 federal income tax return. Tax Advisor timely filed Taxpayer's Year 1 federal income tax return but failed to attach Form 8996 (which is required to certify Taxpayer as a Qualified Opportunity Fund for Year 1). On Date 3, Tax Advisor became aware of his failure to timely file Form 8996 with Taxpayer's federal income tax return for Year 1. Upon being made aware that Form 8996 had not been timely filed, Taxpayer submitted this request for relief.   
     
LAW AND ANALYSIS   
     
Section 1400Z-2(e)(4)(A) directs the Secretary to prescribe regulations for rules for the certification of QOFs. Treasury Regulation § 1.1400Z2(d)-1(a)(2)(i) 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 Service in 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, Qualified Opportunity Fund,  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).   
     
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 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, § 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).   
     
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 § 6501(a) before the taxpayer's receipt of a ruling granting relief under this section.   
     
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 45 days from the date of this letter ruling to file an amended Year 1 income tax return to make the election under § 1400Z-2 and § 1.1400Z2(d)-1(a)(2)(i). The election is to be made on Form 8996.   
     
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 § 1.1400Z2 (a)-1(b)(34) or whether Taxpayer meets the requirements under § 1400Z-2 and the regulations thereunder to be a QOF.   
     
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) of the Code 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.   
     
The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.   
     
In accordance with the Power of Attorney on file with this office, a copy of this letter is being faxed to your authorized representative.   
     
Sincerely,   
     
Lisa Mojiri-Azad   
Senior Technician Reviewer, Branch 4   
Office of Associate Chief Counsel   
(Income Tax and Accounting)   
     
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