Corporation receives more time to elect IC-DISC status

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation, or IC-DISC. Its accounting firm sent Form 4876-A for signature and filing, but a staff transition caused the form not to be filed within the required period. The accounting firm discovered the omission and requested regulatory election relief. The IRS found that the taxpayer satisfied the reasonable-cause and government-prejudice standards in Treasury Regulation section 301.9100-3. It granted 60 days from the ruling date to file Form 4876-A, which would be treated as a timely IC-DISC election for the corporation's first taxable year.

Ruling snapshot

• Question: Could the corporation receive more time to file Form 4876-A and elect IC-DISC status for its first taxable year?
• Outcome: Approved, the corporation received 60 days to file the form.
• 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: 201521010 Third Party Communication: None
Release Date: 5/22/2015 Date of Communication: Not Applicable
Index Number: 9100.22-00, 992.02-00
Person To Contact:
--------------- ------------------------, ID No. ------------------
------------------------ ----------------------------------------------------
-------------------------------- Telephone Number:
----------------------------- ----------------------
Refer Reply To:
In Re: ------------------------ CC:INTL:B06
PLR-143095-14
Date:
February 11, 2015

                                                           TY: -------

Legend

Taxpayer = ------------------------
Accounting Firm --------------------------------
Law Firm = --------------------------------
Corporation = ------------------------------
Interested Party = ----------------------------------------------
Year 1 = -------
Date 1 = --------------------------
Date 2 = ---------------------------
Date 3 = ---------------------------

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

This responds to a letter dated October 10, 2014, 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 penalties 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.
PLR-143095-14 2

                                             FACTS

In Year 1, Accounting Firm advised Corporation of the benefits of establishing an
interest charge domestic international sales corporation (“IC-DISC”). Corporation
engaged Law Firm to incorporate a new entity, Taxpayer, and relied on Accounting Firm
to arrange for Taxpayer to qualify as an IC-DISC. Taxpayer was formed on Date 1 as a
domestic corporation with a calendar taxable year to serve as an IC-DISC. Taxpayer
operates under a commission arrangement with Interested Party. From the time of its
formation, Taxpayer has been owned 100% by Corporation and indirectly 100% owned
by Interested Party.

On Date 2, Accounting Firm sent Form 4876-A to the Chief Financial Officer of
Interested Party with instructions to forward to Taxpayer’s president for signature and
mailing. At that time, there was a transition in the staff person responsible for the
administration of the IC-DISC and Taxpayer inadvertently failed to file Form 4876-A.

On or before Date 3, Accounting Firm discovered that the original Form 4876-A had
never been received by Accounting Firm or filed with the Service. After notifying
Corporation of this fact, Accounting Firm submitted this request for relief under Treas.
Reg. § 301.9100-3 for an extension of time to file Form 4876-A effective Date 1.

                                    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

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-143095-14 3

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 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.

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,


                                _____________________________________
                                Marissa K. Rensen
                                Assistant to Branch Chief, Branch 6
                                Office of Associate Chief Counsel (International)