PLR 1112005: Taxpayer received more time to make an IC-DISC election

Plain-English summary

A domestic corporation asked for more time to file Form 4876-A and shareholder consents so it could be treated as an interest charge domestic international sales corporation, or IC-DISC, for its first taxable year. The filing was late because the accounting firm hired to prepare it did not act until after the deadline. The IRS concluded that the taxpayer acted reasonably and in good faith and granted a 60-day extension under the relief rules in Treasury Regulation § 301.9100-3. The filing would be treated as timely, but the ruling did not decide whether the taxpayer otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the taxpayer receive more time to file the IC-DISC election and shareholder consent statements?
• Outcome: Approved.
• Key authorities: IRC § 992; Treas. Reg. §§ 301.9100-1 and 301.9100-3; Temp. Treas. Reg. § 1.921-1T(b)(1)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201112005 Third Party Communication: None
Release Date: 3/25/2011 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:B06
--------------------------------------- PLR-132521-10
Date:
December 06, 2010
In Re: ---------------------------------------------------
---------------- TY:--------

Legend

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

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

This responds to a letter dated July 7, 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 a 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 information, representations, and other data may be required
as part of the audit process.

PLR-132521-10 2

                                     FACTS

Taxpayer is a domestic corporation wholly owned by Parent. Accounting Firm is a CPA
firm. Taxpayer was formed on Date 1 as the result of Parent and Accounting Firm
discussing the possibility of forming an interest charge domestic international sales
corporation (“IC-DISC”). Parent’s intent was to treat Taxpayer as an IC-DISC from the
date of its inception.

On Date 2, Taxpayer signed an engagement letter with Accounting Firm in which
Accounting Firm agreed to provide assistance with making the IC-DISC election on
behalf of Taxpayer, which included preparing and filing a Form 4876-A. Accounting
Firm failed to take any action on behalf of Taxpayer until Year 1, when Accounting Firm
realized that it had never filed the required Form 4876-A for Taxpayer. By that time, the
due date for filing the Form 4876-A for Taxpayer’s first taxable year had passed.

Taxpayer has requested a ruling that grants an extension of time to file Form 4876-A
and shareholder consent statements so that Taxpayer can be treated as an IC-DISC for
its 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 an IC-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 the 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. 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.

Treasury Regulation § 1.992-2(a)(1)(i) provides, in part, that except as otherwise
provided in paragraphs (b)(3) and (c) of that section, the election to be treated as a DISC
shall be valid only if the consent of every person who is a shareholder of the

PLR-132521-10 3

corporation as of the beginning of the first taxable year for which such election is
effective is on or attached to the Form 4876 when filed with the service center.

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.

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 that the grant of relief will not prejudice the
interests 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 and 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 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, to submit shareholder consent statements, 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 and shareholder consent statements.

PLR-132521-10 4

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. 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.

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: