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, but its Form 4876-A election was not filed for its first taxable year. The filing failure resulted from miscommunication involving the corporation's representative, an accounting firm, and the corporation's controller. The IRS concluded that the corporation satisfied the standards for discretionary relief under Treasury Regulation section 301.9100-3. It granted 60 days from the ruling date to file Form 4876-A and ruled that the filing would be treated as a timely IC-DISC election. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation receive an extension to file Form 4876-A and elect IC-DISC status for its first taxable year?
• Outcome: Approved, with 60 days to file.
• Key authorities: IRC § 992(b)(1)(A); 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: 201527037 Third Party Communication: None
Release Date: 7/2/2015 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:B06
In re: ----------------------------------------------------- PLR-143654-14
----------------------- Date:
March 31, 2015

                                                           TY: ------

                                                LEGEND

Taxpayer = ------------------------------------------------------------------
Company = ------------------------------------------------
State = ------------
Accounting Firm = -------------------------------
Individual = --------------------
Date 1 = ----------------
Date 2 = ------------------
Date 3 = ------------------
Date 4 = ------------------
Date 5 = ---------------------
Date 6 = -----------------------

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

This responds to a letter dated November 20, 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 penalty of perjury
statements executed by appropriate parties. This office has not verified any of the

PLR-143654-14 2

material submitted in support of the request for rulings. It is subject to verification on
examination.

                                             FACTS

Taxpayer is a domestic corporation wholly owned by Company. Taxpayer was formed
to serve as an interest charge domestic international sales corporation (“IC-DISC”) and
has established a commission arrangement with Company. Taxpayer was formed on
Date 1 in State as an accrual basis taxpayer.

Individual engaged Accounting Firm to assist Taxpayer with the preparation and filing of
Form 4876-A. Accounting Firm prepared Form 4876-A and forwarded the form to
Individual on Date 2 to coordinate completion, execution and filing of the Form.
Accounting Firm instructed that the Form be filed on or before Date 3. Individual relies
on Taxpayer’s controller to handle tax filings, but Accounting Firm failed to copy
Taxpayer’s controller on the email. When Individual read through the Form 4876-A
election email, Individual thought it was something that Individual had already signed
and deleted the email. At that point, Individual thought the Form 4876-A election was
filed and no further action was required on his part. On Date 4, Accounting Firm sent a
reminder email to Individual and once again failed to copy the controller. Individual did
not open the reminder email under Date 5. At this time, Individual was still under the
impression that the election was properly filed. On Date 6, Taxpayer became aware
that the Form 4876-A election was not filed when Taxpayer received a notice from the
IRS indicating that the 1120-IC-DISC return could not be processed because a Form
4876-A election had not been filed by Taxpayer.

Taxpayer has requested a ruling that grants an extension of time of 60 days from the
date of the ruling letter to file Form 4876-A and that such filing will be treated as a timely
election to be treated as an IC-DISC for Taxpayer’s 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.

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 shall make its election within 90 days after the beginning of that
year.

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

PLR-143654-14 3

Treas. Reg. § 301.9100-1(c) provides, in part, that the Commissioner, in exercising his
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 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 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, this ruling neither expresses nor implies any
opinion concerning the tax consequences of any aspect of any transaction or item
discussed or referenced in this ruling letter.

PLR-143654-14 4

Pursuant to a Power of Attorney on file in this office, a copy of this ruling letter is being
furnished to your authorized representative.

                                    Sincerely,



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