PLR 1108013: Late IC-DISC election receives an extension

Plain-English summary

A domestic corporation intended to be treated as an interest charge domestic international sales corporation, or IC-DISC, from its formation. Its representative failed to file Form 4876-A within the required 90-day period. The IRS concluded that the taxpayer acted reasonably and in good faith and that late-election relief would not prejudice the government. It granted 60 days from the ruling date to file Form 4876-A, while noting that the ruling did not determine whether the taxpayer otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the taxpayer file its Form 4876-A election after the 90-day deadline?
• Outcome: Approved
• Key authorities: IRC § 992(b)(1); Treas. Reg. §§ 301.9100-1 and 301.9100-3; Temp. Treas. Reg. § 1.921-1T

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201108013 Third Party Communication: None
Release Date: 2/25/2011 Date of Communication: Not Applicable
Index Number: 9100.22-00, 992.02-00
Person To Contact:
------------- --------------------, ID No. -------------
------------------------------ Telephone Number:
----------------------------------------------------- ---------------------
-------------------- Refer Reply To:
------------------------------------ CC:INTL:BR6
PLR-127970-10
In Re: ----------------------------------------------------- Date:
------------------------------------------------------------- November 23, 2010

                                                              TY: -------

LEGEND

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

Parent = ---------------------------
Accounting Firm = ---------------------------
Date 1 = -----------------
Date 2 = ----------------------
Year 1 = -------

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

This responds to a letter dated June 23, 2010, 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 Form 4876-A, “Election To Be Treated as an Interest Charge DISC,”
for Taxpayer’s first taxable year.

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

                                                    FACTS

Taxpayer is a domestic corporation wholly owned by Parent, which is a closely-held
corporation that has elected subchapter S status. Accounting Firm is an audit, tax, and
PLR-127970-10 2

advisory organization. Taxpayer was incorporated on Date 1 and was intended to be
treated as an interest charge domestic international sales corporation (“IC-DISC”) from
inception. Unfamiliar with IC-DISC tax matters, Parent engaged Accounting Firm to
take all the necessary steps to elect Taxpayer’s IC-DISC status for Year 1. Believing all
the requirements to conduct business and to be treated as an IC-DISC for its first
taxable year were satisfied, Taxpayer began operating as an IC-DISC as of Date 1.

Even though Taxpayer had assumed that the necessary requirements to conduct
business as an IC-DISC were satisfied, it did not qualify as an IC-DISC for federal
income tax purposes because it did not timely file a Form 4876-A with the Service within
90 days of Date 1. Accounting Firm did not realize until Date 2 that it had not filed the
Form 4876-A. Upon discovery that the form had not been filed, Taxpayer instructed
Accounting Firm to submit a ruling request to the Service for an extension of time to file
Form 4876-A for Taxpayer’s first taxable year.

                             LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code (“Code”) 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) of the Code 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.

Temporary Treasury Regulation § 1.921-1T(b)(1) provides, in part, that a corporation
electing IC-DISC status must file Form 4876-A. 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.

Treasury Regulation § 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.

Treasury Regulation § 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.
PLR-127970-10 3

Treasury Regulation § 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 the grant of relief will not prejudice the interest
of the Government.

Taxpayer requests an extension of time to make a timely election described in Temp.
Treas. Reg. § 1.921-1T(b)(1) for its first taxable year. This 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, 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. Such filing will be treated
as a timely election to be treated as an IC-DISC for Taxpayer's first taxable year
beginning Date 1.

                                     Caveats

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 filed with the Form
4876-A.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Code provides that written determinations may not be used or cited as precedent.
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.
PLR-127970-10 4

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,


                                       Joseph P. Dewald
                                       Assistant to the Branch Chief, Branch 6
                                       Office of Associate Chief Counsel
                                       (International)

Enclosures (2)
Copy of this letter
Copy for § 6110 purposes

cc: