PLR 200934029: 60-day extension granted for a DISC election

Plain-English summary

The IRS granted a corporation an extension of time to file Form 4876-A and elect interest charge domestic international sales corporation status. The corporation intended to qualify as a DISC from its inception but missed the 90-day filing deadline. The IRS allowed 60 days from the May 20, 2009 ruling letter to file the form, and stated that the filing would be treated as a timely first-year DISC election. The extension did not determine whether the corporation otherwise qualified for the election or could claim DISC status or benefits.

Ruling snapshot

• Question: Could the corporation receive extra time to file Form 4876-A and make a timely first-year DISC election?
• Outcome: Approved
• Key authorities: IRC §§ 992(b)(1)(A), 992(b)(1)(B), 6501(a), and 6110(k)(3); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200934029
Third Party Communication: None
Release Date: 8/21/2009
Date of Communication: Not Applicable
Index Number: 992.02-00, 9100.22-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:INTL:B06
PLR-150571-08
Date:
May 20, 2009

LEGEND

Taxpayer = -------------------------------
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Company = ------------------------

Accounting Firm = ---------------------------

Law Firm = ------------------------------------------------------

State A = -------------------

Product Y = ---------------------------------------------------------------------------------
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X = -----------

Year Z = -------

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

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

Date 3 = ----------------------

Date 4 = ---------------------------

Date 5 = ---------------------------

Date 6 = ---------------------------
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Dear -----------------:

This responds to the letter from your authorized representative dated November 25, 2008, and subsequent correspondence, requesting a ruling that Taxpayer be permitted an extension of time under Treas. Reg. § 301.9100-3 to file Form 4876-A (“Election to be Treated as an Interest Charge DISC”) in accordance with Temp. Treas. Reg.
§ 1.921-1T(b)(1) to be effective as of Date 1.

The rulings given in this letter are based on facts and representations submitted by Taxpayer and accompanied by a penalties of perjury statement. This office has not verified any of the materials submitted in support of the request for rulings. Verification of the information, representations, and other data may be required as part of the audit process.

Facts

Taxpayer is a domestic corporation incorporated in State A on Date 1, with Articles of Correction filed on Date 2, both with an effective date of Date 3. The shareholders of Taxpayer are shareholders or salaried employees of Company, a domestic corporation. Company is a manufacturer of Product Y. Accounting Firm is a certified public accounting firm that discussed with Company during Year Z the creation of Taxpayer as an interest charge domestic international sales corporation (“DISC”) for export sales of Company, and Taxpayer intended this treatment from the date of inception. Taxpayer has a calendar year taxable year. Company has a taxable year that ends on X.

On Date 4, a partner in Accounting Firm discovered that Taxpayer failed to file Form 4876-A (“Election to be Treated as an Interest Charge DISC”) within 90 days after Date 1. After internal discussions, Accounting Firm notified Taxpayer on Date 5 of the mistake in meeting the required deadline. On Date 6, Taxpayer engaged Law Firm to request relief pursuant Treas. Reg. § 301.9100-1. Taxpayer represents that it intended all along to qualify as a DISC and reasonably believed that it could operate as a DISC.

The period of limitations on assessment under section 6501(a) has not expired for Taxpayer’s taxable years for which the election is being made or any taxable years that would have been affected by the election had Taxpayer made a timely election.

Taxpayer has requested a ruling that grants an extension of time to file Form 4876-A so that the election will be treated as timely filed within 90 days after the beginning of its first taxable year.
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Law and Analysis

Section 992(b)(1)(A) provides that an election by a corporation to be treated as a DISC shall be made by such corporation for a taxable year at any time during the 90-day period immediately preceding the beginning of the taxable year, except that the Secretary may give his consent to the making of an election at such other times as he may designate.

Section 992(b)(1)(B) provides that such election shall be made in such manner as the Secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable year for which such election is effective consent to such election.

Temp. Treas. Reg. § 1.921-1T(b)(1) provides, in part, that a corporation electing DISC status must file Form 4876-A and that a corporation electing to be treated as a DISC for its first taxable year shall make its election within 90 days after the beginning of that year.

Treas. Reg. § 301.9100-1(c) provides, in part, that the Commissioner, in exercising the Commissioner’s discretion, may grant a reasonable extension of time under the rules set forth in Treas. Reg. §§ 301.9100-2 and 301.9100-3 to make a regulatory election under all subtitles of the Code except subtitles E, G, H, and I.

Treas. Reg. § 301.9100-1(b) provides that a regulatory election is an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin. For this purpose, an election includes an application for relief in respect of tax.

Treas. Reg. § 301.9100-3(a) provides that requests for extensions of time for regulatory elections that do not meet the requirements of Treas. Reg. § 301.9100-2 (automatic extensions) must be made under the rules of Treas. Reg. § 301.9100-3. Requests for relief subject to Treas. Reg. § 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in Treas. Reg. § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that the grant of relief will not prejudice the interest of the Government.

In the present situation, the election described in Temp. Treas. Reg. § 1.921-1T(b)(1) is a regulatory election as defined in Treas. Reg. § 301.9100-1(b). Therefore, the Commissioner has discretionary authority under Treas. Reg. § 301.9100-1(c) to grant Taxpayer an extension of time, provided that Taxpayer satisfies the standards for relief set forth in Treas. Reg. § 301.9100-3.

Based on the facts and representations submitted with Taxpayer’s ruling request, we conclude that Taxpayer satisfies Treas. Reg. § 301.9100-3(a). Accordingly, Taxpayer is
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granted an extension of time of 60 days from the date of this ruling letter to file Form 4876-A required by Temp. Treas. Reg. § 1.921-1T(b)(1). Such filing will be treated as a timely election to be treated as a DISC for Taxpayer’s first taxable year.

The granting of an extension in this ruling letter is not a determination that Taxpayer is otherwise eligible to make the election or to claim DISC status or benefits. See Treas. Reg. § 301.9100-1(a). A copy of this letter ruling should be filed with the Form 4876-A.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) provides that written determinations may not be used or cited as precedent. Except as expressly provided herein, this ruling neither expresses nor implies any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this ruling letter.

Pursuant to a power of attorney on file in this office, a copy of this ruling letter is being furnished to your authorized representatives.

Sincerely,

____
Christopher J. Bello
Chief, Branch 6
Office of Associate Chief Counsel
(International)

Enclosure:
Copy for 6110 purposes