PLR 201132001: Late IC-DISC election granted after adviser oversight

Plain-English summary

The IRS granted a corporation 60 more days to file Form 4876-A and elect IC-DISC status for its first taxable year. The corporation had been formed for that purpose, but its accounting firm missed the filing deadline through a procedural oversight. The IRS concluded that the taxpayer acted reasonably and in good faith and that the extension would not prejudice the government. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation make a late Form 4876-A election to be treated as an IC-DISC?
• Outcome: approved
• Key authorities: IRC § 992; Temp. Treas. Reg. § 1.921-1T; Treas. Reg. §§ 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201132001
Third Party Communication: None
Release Date: 8/12/2011
Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.22-00, 992.02-00
------------------, ID No. -------------
Telephone Number:
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Refer Reply To:
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CC:INTL:B06
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PLR-100126-11
----------------------------------------------------- Date:
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May 10, 2011
In Re: -------------------------------

TY: -------

Legend

Taxpayer = ------------------------------
Company = ------------------------------------------------
Products = ---------------------------------------------------------------------------------
Accounting Firm = ----------------------------
Individual A = -------------------------
Date 1 = --------------------
Date 2 = --------------------------
Date 3 = ----------------------------
Month 1 = -------------------

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

This responds to a letter 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.
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FACTS

Taxpayer is a domestic corporation. Company, also a domestic corporation, is an affiliate of Taxpayer that manufactures and exports Products. Accounting Firm is an accounting, tax, and consulting firm.

In Month 1, representatives of Accounting Firm met with Individual A, Company’s CFO, to discuss the tax advantages of forming an interest charge domestic international sales corporation (“IC-DISC”). As a result, Taxpayer was incorporated on Date 1 with the sole intention of qualifying and operating as an IC-DISC. On Date 2, Company formally engaged Accounting Firm to assist in electing IC-DISC status for Taxpayer, which included preparing Form 4876-A.

On Date 3, Accounting Firm realized that Form 4876-A had not been filed with the Service on behalf of Taxpayer. This was due to a procedural oversight on the part of Accounting Firm. By that time, the due date for filing a 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 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 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 the 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. 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
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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.

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, 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.

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 and shareholder consent statements.

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.
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In accordance with the Power of Attorney on file with this office, a copy of this letter is being furnished to your authorized representative.

Sincerely,

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

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

cc: