Corporation receives relief to file a late IC-DISC election

Plain-English summary

A domestic corporation intended to be treated as an interest charge domestic international sales corporation, or IC-DISC, from its formation. Its attorney agreed to prepare Form 4876-A but later discovered that the form had not been prepared or filed within the required 90-day period. The IRS concluded that the corporation met the standards for discretionary relief because it acted reasonably and in good faith and relief would not prejudice the government. It granted the corporation 60 days from the ruling date to file the form, which would then be treated as a timely election for its first taxable year. The ruling does not determine whether the corporation otherwise qualifies for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation receive more time to file Form 4876-A for its first taxable year?
• Outcome: Approved. The corporation received 60 days from the ruling date to file the election.
• Key authorities: IRC § 992(b)(1); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201516013 Third Party Communication: None
Release Date: 4/17/2015 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:BR6
PLR-123934-14
Date:
December 15, 2014
In Re: --------------------------------------

LEGEND

Taxpayer = --------------------------------------
Individual = ---------------
Trust = --------------------------------------
Accounting Firm = --------------------------------
Law Firm = -------------------------------------
Attorney = ----------------------
Year 1 = ------
Year 2 = ------
Date 1 = -------------------
Date 2 = -----------------

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

This responds to a letter dated June 12, 2014, submitted on behalf of Taxpayer,
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 given in this letter are based on facts and representations submitted by
Taxpayer, Accounting Firm, Law Firm, and Attorney, and accompanied by penalty of
perjury statements executed by appropriate parties. This office has not verified any of
the materials submitted in support of the request for a ruling. Verification of the factual
information, representations, and other data may be required as part of the audit process.
PLR-123934-14 2

                                              FACTS

Taxpayer is a domestic corporation owned by Individual and Trust. Individual is president
of Taxpayer, trustee of Trust, and a sole proprietor.1 Accounting Firm is an accounting,
and tax and financial planning organization. Law Firm is a full-service law firm. Attorney
is a licensed tax attorney employed by Law Firm. In late Year 1 or early Year 2,
Accounting Firm advised Individual of the benefits associated with interest charge
domestic international sales corporations (“IC-DISCs”). At the suggestion of Accounting
Firm, Individual engaged Law Firm to further advise Individual on the formation and
operation of IC-DISCs, including, but not limited to, the preparation and filing of the
necessary elections and documents that would need to be filed for Taxpayer to be
treated as an IC-DISC.

Taxpayer was incorporated on Date 1 and was intended to be treated as an IC-DISC
from inception. Following the incorporation of Taxpayer, Attorney agreed to be
responsible for preparing and providing Form 4876-A to Accounting Firm for the purpose
of obtaining signatures and filing the signed Form 4876-A. Thus, Accounting Firm, at all
times, expected Law Firm to timely prepare and provide Form 4876-A. Believing all the
requirements to conduct business and to be treated as an IC-DISC were satisfied,
Taxpayer began operating as an IC-DISC as of Date 1. On Date 2, in reviewing Law
Firm’s files regarding Taxpayer, Attorney realized he had failed to prepare Form 4876-A.

Even though Taxpayer had assumed that all the necessary requirements to conduct
business as an IC-DISC were satisfied, it did not qualify as an IC-DISC for federal income
tax purposes because it did not timely file a Form 4876-A with the Service within 90 days
after Date 1. Taxpayer represents that it did not realize this error until Date 2 when
informed by Attorney that Form 4876-A had not been timely prepared. Upon discovery
that the form had not been filed, Taxpayer requested that Law Firm submit a ruling
request granting Taxpayer 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 DISC2
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
1
The beneficiary of Trust is Individual. Individual asserts that Trust does not involve a Roth IRA or any
other kind of tax-favored retirement account.
2
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-123934-14 3

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. A corporation electing to be treated as an IC-DISC for its
first taxable year must make the 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.

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 the grant of relief will not prejudice the interests of the Government.

The election described in the third sentence of 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.

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). In addition, we express no opinion as to whether the payment of
purchase prices or commissions (or portions thereof) to Taxpayer by Company may
constitute taxable gifts. See, e.g., Rev. Rul. 81-54, 1981-1 C.B. 476. A copy of this letter
ruling should be filed with the Form 4876-A.
PLR-123934-14 4

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Code provides that written determinations 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 representatives.

                                       Sincerely,



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

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

cc: