PLR 1346003: IRS grants extra time for an IC-DISC election

Plain-English summary

The IRS granted a corporation a 60-day extension to file Form 4876-A and make an IC-DISC election for its first taxable year. The corporation had been formed for that purpose, but its owners mistakenly believed that the accounting firm had filed the form. The IRS found that the taxpayer satisfied the requirements for relief based on the submitted facts, affidavits, and representations. The ruling did not determine whether the taxpayer was otherwise eligible for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation receive an extension to make its first-year IC-DISC election?
• Outcome: Approved, 60-day filing extension granted
• 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: 201346003 Third Party Communication: None
Release Date: 11/15/2013 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-113185-13
Date:
August 19, 2013

                                                  -------------

Legend

Taxpayer = -----------------------------------
Accounting Firm = ---------------------------
Company = ----------------------------------------
Individual A = ------------------------
Individual B = --------------------------
State A = -------------
Year 1 = -------
Date 1 = ----------------
Date 2 = ---------------------------
Date 3 = ---------------------------
Month 1 = ----------------------

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

This responds to a letter dated March 20, 2013, submitted by Accounting Firm
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 contained in this letter are based upon information and representations
submitted by Taxpayer and Accounting Firm, and accompanied by affidavits and
penalty of perjury statements executed by appropriate parties. This office has not
verified any of the materials submitted in support of the request for rulings. It is subject
to verification on examination.
PLR-113185-13 2

                                             FACTS

Taxpayer is a domestic corporation that assists Company with the export of property.
Company, an S corporation, wholly owns Taxpayer. Individual A and Individual B
wholly own Company and are officers of Company.

In Year 1, Accounting Firm approached Individual A and Individual B to discuss forming
an interest charge domestic international sales corporation (“IC-DISC”). Individual A
and Individual B were not familiar with IC-DISC matters and were inexperienced with
international tax matters and filings. They subsequently engaged Accounting Firm to
take all necessary steps to elect IC-DISC status for Year 1. As a result, Taxpayer was
incorporated on Date 1 in State A with the sole purpose of qualifying and operating as
an IC-DISC. Taxpayer began operating as an IC-DISC on Date 1.

Accounting Firm prepared a Form 4876-A and sent it to Individual A and Individual B on
Date 2. Individual A and Individual B mistakenly believed that Accounting Firm filed the
Form 4876-A and that the correspondence was confirmation of the filing. As a result,
Individual A and Individual B believed that no further action was required.

Accounting Firm did not confirm whether Taxpayer had timely filed the Form 4876-A.
Believing all requirements for IC-DISC status had been satisfied, Accounting Firm
prepared the 2011 Form 1120-IC-DISC tax return for Taxpayer, which was signed by
Individual A and filed. In Month 1, Taxpayer and Accounting Firm received a letter
dated Date 3 from the Service stating that the Service had no record that a Form 4876-
A had been filed.

After discovering that the Form 4876-A had not been filed, Taxpayer requested a ruling
granting an extension of time to file Form 4876-A for its first taxable year.

                                    LAW AND ANALYSIS

Section 992(b)(1)(A) provides that an election by a corporation to be treated as a DISC1
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.

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-113185-13 3

Temporary Treasury Regulation § 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.

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.

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. Such filing will be treated as a timely election to be treated as an
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 or to claim IC-DISC status or benefits. See
Treas. Reg. § 301.9100-1(a). Taxpayer should attach a copy of this ruling letter to its
Federal income tax return for the taxable years to which this letter applies.

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.
PLR-113185-13 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
                                Senior Technical Reviewer, Branch 6
                                Office of Associate Chief Counsel (International)

cc: