PLR 201351012: IC-DISC election treated as timely after filing problem

Plain-English summary

A corporation formed to operate as an interest charge domestic international sales corporation, or IC-DISC, mailed its Form 4876-A election but later learned that the IRS service center had no record of receiving it. The taxpayer did not contest whether the form had been received and instead requested relief under the regulatory-election rules. The IRS granted 60 days from the ruling date to file the form, treating the filing as a timely IC-DISC election for the first taxable year. The ruling did not decide whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May an IC-DISC receive extra time to file Form 4876-A after the IRS has no record of the original filing?
• Outcome: Approved
• Key authorities: IRC § 992; Treas. Reg. §§ 1.921-1T, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201351012
[Third Party Communication:
Release Date: 12/20/2013
Date of Communication: Month DD, YYYY]
Index Number: 9100.22-00, 992.02-00
Person To Contact:
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Refer Reply To:
CC:INTL:B06
In Re: ---------------------------------------- PLR-121201-13 Date:
September 19, 2013

TY: -------
Legend

Taxpayer = --------------------------------------------------------------------------- Accounting Firm = ------------------------------------------- Company = ------------------------------- Shareholder = -------------------------- Date 1 = -------------------- Date 2 = ---------------------- Date 3 = ---------------------- Date 4 = ------------------- State A = ----------

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

This responds to a letter dated April 05, 2013, supplemented by letters dated July 07, 2013, and August 29, 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 penalty of perjury statements executed by appropriate parties. 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 with a calendar taxable year. Taxpayer was formed to serve as an interest charge domestic international sales corporation (“IC-DISC”) and
PLR-121201-13
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has established a commission arrangement with Company. Taxpayer and Company both are wholly owned by Shareholder.

On Date 1, Shareholder and Accounting Firm met on to discuss the establishment of an IC-DISC. Shortly thereafter on Date 2, Shareholder decided to proceed with the establishment of an entity to be an IC-DISC. Shareholder incorporated Taxpayer on Date 3 in State A. Taxpayer intended to elect to be treated as an IC-DISC as of Date 3.

On Date 4, Taxpayer and Shareholder signed and mailed Form 4876-A to the appropriate IRS service center. The Form 4876-A was not sent by certified mail nor was a return receipt requested.

After Taxpayer filed its initial Form 1120-IC-DISC (“Interest Charge Domestic International Sales Corporation Return”), Taxpayer received a notice from an IRS service center indicating that the service center did not have any record of the Form 4876-A having been filed. Taxpayer is not contesting whether the service center received the Form 4876-A. Instead, Taxpayer requests relief under Treas. Reg. § 301.9100-3 for an extension of time to file the IC-DISC election effective Date 3.

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.

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.

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As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
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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 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). A copy of this letter ruling should be filed with the Form 4876-A.

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,

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