PLR 200940010: IC-DISC election extension granted after missed filing deadline

Plain-English summary

A domestic corporation asked for more time to file Form 4876-A and elect IC-DISC status for its first taxable year. Its accounting firm intended to prepare the form, but a miscommunication meant that the form was not filed within the required 90-day period. The IRS found that the corporation satisfied the requirements for relief under Treas. Reg. § 301.9100-3 and granted 60 days from the ruling letter to file Form 4876-A and the shareholder consent statement. The ruling did not determine whether the corporation otherwise qualified for DISC status or benefits.

Ruling snapshot

• Question: Could the corporation receive an extension of time to file Form 4876-A and make its IC-DISC election?
• Outcome: Approved, 60-day extension granted.
• Key authorities: IRC § 992; Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 1.992-2(a)(1)(i) and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200940010
Third Party Communication: None
Release Date: 10/2/2009
Date of Communication: Not Applicable
Index Number: 992.02-00, 9100.22-00
Person To Contact:
------------------------
--------------------, ID No. ------------
-------------
Telephone Number:
-----------------------------------
---------------------
---------------------------
Refer Reply To:
--------------------------------------------- CC:INTL:B06 PLR-110175-09
Date:
July 07, 2009

LEGEND

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

Parent = ------------------
----------------------
------------------------

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

X = --------------------------------------------------------

Y = -------------------------------------

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

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

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

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

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

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

This responds to the letter from your authorized representative dated February 21, 2009, requesting a ruling that Taxpayer be permitted an extension of time under Treas.

PLR-110175-09
2

Reg. §§ 301.9100-1 and 301.9100-3 to file Form 4876-A (“Election to be Treated as an Interest Charge DISC”) (including the shareholder’s consent statement) in accordance with Temp. Treas. Reg. § 1.921-1T(b)(1) and Treas. Reg. § 1.992-2(a)(1)(i) to be effective as of Date 1.

The rulings given in this letter are based on facts and representations submitted by Taxpayer and other parties and accompanied by penalties of perjury statements. 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 wholly owned by Parent, also a domestic corporation. Parent manufactures X and holds intangible property Y used in the manufacture of X. Taxpayer was incorporated on Date 1 and was intended to be treated as an interest charge domestic international sales corporation (“IC-DISC”) from the date of inception. Both Taxpayer and Parent use the accrual method of accounting with a calendar taxable year-end.

Accounting Firm is a certified public accounting firm that provides tax services to Parent and advised Parent on the benefits and requirements of forming and IC-DISC. Accounting Firm had internal correspondence by email on Date 2 of the need for Taxpayer to file Form 4876-A within 90 days of Date 1. Accounting Firm believes it prepared a Form 4876-A; however, due to a miscommunication between Accounting Firm and Taxpayer, a Form 4876-A was not filed. On Date 3, Accounting Firm prepared and Taxpayer filed a Form 1120-IC-DISC for the tax year ended Date 4. On Date 5, Taxpayer received correspondence from the Internal Revenue Service that indicated that a Form 4876-A, had not been filed. Taxpayer represents that it intended all along to qualify as a IC-DISC and cites the filing of Form 1120-IC-DISC as evidence of this intent.

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 form will be treated as timely filed within 90 days after the beginning of its first taxable year.

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

PLR-110175-09
3

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. Temp. Treas. Reg. § 1.921-1T(b)(1) further provides that the rules contained in Treas. Reg. § 1.992-2(a)(1), (b)(1), and (b)(3) shall apply to the manner of making the election and the manner and form of shareholder consent to the election.

Treas. Reg. § 1.992-2(a)(1)(i) provides that, except as otherwise provided in paragraphs (b)(3) and (c) of that section, the election to be treated as a domestic international sales corporation shall be valid only if the consent of every person who is a shareholder of the corporation as of the beginning of the first taxable year for which such election is effective is on or attached to the Form 4876-A when filed with the service center.

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

PLR-110175-09
4

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 granted an extension of time of 60 days from the date of this ruling letter to file Form 4876-A and the shareholder consent statement required by Temp. Treas. Reg.
§ 1.921-1T(b)(1) and Treas. Reg. § 1.992-2(a)(1)(i). Such filing will be treated as a timely election to be treated as a IC-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, to submit shareholder consent statements, 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 and shareholder consent statement.

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,

____
John E. Hinding
Senior Technical Reviewer
Office of Associate Chief Counsel
(International)

Enclosure:
Copy for 6110 purposes