Sixty-day extension granted for a late IC-DISC election

Plain-English summary

The IRS granted a domestic corporation 60 days to file a late Form 4876-A election to be treated as an interest charge domestic international sales corporation. The corporation had filed the form 92 days after incorporation, two days outside the applicable 90-day period. The IRS found that the taxpayer satisfied the reasonable-cause and good-faith standard because its advisers failed to complete the filing on time and the IRS had not discovered the error. The extension did not determine whether the corporation was otherwise eligible for IC-DISC status or benefits.

Ruling snapshot

• Question: Should the corporation receive additional time to make its late IC-DISC election?
• Outcome: Approved
• Key authorities: IRC §§ 921 and 992; Treas. Reg. §§ 301.9100-1 and 301.9100-3; Temp. Treas. Reg. § 1.921-1T(b)(1); 26 U.S.C. § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

                                                         Third Party Communication: None

Number: 201025043 Date of Communication: Not Applicable
Release Date: 6/25/2010 Person To Contact:
Index Number: 9100.22-00, 992.02-00
------------------------, ID No. -------------
------------------------ Telephone Number:
------------------------------------------ ---------------------
--------------------- Refer Reply To:
--------------------------------------- CC:INTL:B06
PLR-149321-09
Date:
March 04, 2010

                                                           TY: -------

Legend

Taxpayer = ------------------------
Advisory Firm = --------------------------------------
Accounting Firm = ------------------------------------------
Month 1 = ------------------
Date 1 = -----------------------
Date 2 = -------------------
Date 3 = --------------------------
Shareholders = --------------------------------------------------------------

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

This responds to a letter dated October 20, 2009, submitted by Accounting Firm
(Taxpayer’s authorized representative) requesting that the Internal Revenue Service
(“Service”) grant Taxpayer an extension of time under Treas. Reg. §§ 301.9100-1 and
301.9100-3 to file a Form 4876-A (Election to be treated as an Interest Charge DISC)
for Taxpayer’s first taxable year.

The rulings contained in this letter are based upon information 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 rulings. It is subject to verification on examination.

Facts

Taxpayer is a domestic corporation directly owned by Shareholders with a calendar
taxable year. Advisory Firm engages in implementation of interest charge domestic
international sales corporations (“IC-DISCs”). Accounting Firm is an accounting, tax,

PLR-149321-09 2

and business consulting firm. In Month 1, Accounting Firm advised Shareholders of the
tax advantages associated with IC-DISCs. However, Accounting Firm did not engage in
the practice of incorporating IC-DISCs. Thus, Shareholders hired Advisory Firm to
prepare and file all the necessary incorporation documents and agreements for the IC-
DISC. From its incorporation on Date 1, Taxpayer was intended to be treated as an IC-
DISC.

On Date 2 (92 days after Date 1), Advisory Firm filed Form 4876-A on behalf of
Taxpayer. When Accounting Firm began preparation of Form 1120-IC-DISC (Interest
Charge Domestic International Sales Corporation Return), Accounting Firm discovered
that the Form 4876-A election was filed late. On Date 3, Accounting Firm informed
Taxpayer that Form 4876-A was not filed during the 90-day period described in Temp.
Treas. Reg. § 1.921-1T(b)(1). Accounting Firm, acting on Taxpayer’s behalf, submitted
this letter ruling request. At the time of the request, the Internal Revenue Service had
not discovered the late filing.

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.

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 IC-
DISC status must file Form 4876-A and that a corporation electing to be treated as an IC-
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.

PLR-149321-09 3

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.

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 the
election described in Temp. Treas. Reg. § 1.921-1T(b)(1) with respect to its 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 IC-DISC status or benefits. See
Treas. Reg. § 301.9100-1(a). A copy of this letter ruling should be attached to the
Federal income tax return for any taxable year to which the ruling applies.

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.

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 power of attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

                                    Sincerely,

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