PLR 1351015: IC-DISC receives extra time to file its election

Plain-English summary

A domestic corporation formed to operate as an interest charge domestic international sales corporation, or IC-DISC, failed to file the required shareholder-consented Form 4876-A election for its first taxable year. The IRS found that the taxpayer acted reasonably and in good faith and that granting relief would not prejudice the government. It therefore granted the corporation 60 days from the ruling date to file the form, with the filing treated as timely. The ruling did not decide whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May an IC-DISC receive more time to file its first-year election?
• 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: 201351015 Third Party Communication: None
Release Date: 12/20/2013 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-130862-13
Date:
September 24, 2013

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

Legend

Taxpayer = -----------------------------------------
Accounting Firm = ----------------------------------------------------
Company = -------------
Individual A = ---------------------
Individual B = ------------------
Individual C = -----------------
Individual D = ------------------------
Individual E = ----------------------
Year 1 = -------
Date 1 = -------------------
Date 2 = --------------------
Month 1 = -----------------------
Month 2 = -----------------

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

This responds to a letter dated July 1, 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-130862-13 2

                                             FACTS

Taxpayer is a domestic corporation wholly owned by Individuals A, B, and C. Taxpayer
was formed for the sole purpose of qualifying and operating as an interest charge
domestic international sales corporation (“IC-DISC”) and operates under a commission
arrangement with Company. Individuals A, B, and C also own 99.9 percent of the
outstanding stock of Company. Individuals D and E own the remaining 0.1 percent of
the outstanding stock of Company.

In Year 1, Accounting Firm and Individuals B and D discussed forming an IC-DISC.
After the shareholders of Company decided to form an IC-DISC, Accounting Firm
engaged a local attorney to complete and file the documents necessary to incorporate
Taxpayer. Taxpayer was incorporated on Date 1 and began operating as an IC-DISC in
Month 1. Individual B was appointed as Taxpayer’s Treasurer.

Individual B was unaware that a shareholder signed election form was required to be
filed with the Service to elect IC-DISC treatment. Individual B also believed that
Accounting Firm filed all of the documents needed for Taxpayer to operate as an IC-
DISC.

In Month 2, an employee of Company prepared and filed the 2012 Form 1120-IC-DISC
tax return for Taxpayer. Several weeks later, Taxpayer received a letter dated Date 2
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-130862-13 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-130862-13 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)