Late IC-DISC election received a 60-day extension

Plain-English summary

A newly formed domestic corporation intended to elect interest charge DISC status from its inception and relied on outside counsel to prepare and file Form 4876-A. Counsel sent the form and received a date-stamped return copy, but the IRS later said the election had been denied and could not process the corporation's first Form 1120-IC-DISC. The corporation and counsel represented that they had not received the denial notice and believed the original form inadvertently omitted required information. The IRS found that the corporation acted reasonably and in good faith under the section 301.9100 regulations. It granted 60 days to file Form 4876-A, which would be treated 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: Could the corporation make a late IC-DISC election after its originally filed Form 4876-A was denied?
• Outcome: Approved, with 60 days to file Form 4876-A
• Key authorities: IRC § 992(b); Temp. Treas. Reg. § 1.921-1T; Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201533003 Third Party Communication: None
Release Date: 8/14/2015 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-104420-15
Date:
May 12, 2015

                                                           TY: -------

Legend

Taxpayer = -------------------------------------
Law Firm 1 = -----------------------------
Law Firm 2= -----------------------------
Parent = -------------------
Year 1 = -------
Date 1 = ----------------------
Date 2 = ------------------------
Date 3 = ------------------------
Date 4 = ---------------------------
Date 5 = --------------------------

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

This responds to a letter dated January 28, 2015, submitted by Law Firm 1 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, Law Firm 1, and Law Firm 2, 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-104420-15 2

                                             FACTS

Taxpayer is a domestic corporation wholly owned by Parent. Parent is owned by seven
individuals. Taxpayer operates under a commission arrangement with Parent. Law
Firm 1 is a full-service law firm. Law Firm 2 is a regional law firm that specializes in
business and litigation matters. In Year 1, Parent engaged Law Firm 2 to incorporate a
new entity, Taxpayer, and relied on Law Firm 2 to arrange for Taxpayer to qualify as an
interest charge domestic international sales corporation (“IC-DISC”), including, but not
limited to, the preparation and filing of Form 4876-A. Taxpayer was incorporated on
Date 1 and was intended to be treated as an IC-DISC from inception.

On Date 2, Law Firm 2 sent Form 4876-A to the Service. Law Firm 2 received from the
Service a return copy of the Form 4876-A with the date stamp of receipt of Date 3.

Taxpayer timely filed its Form 1120-IC-DISC (“Interest Charge Domestic International
Sales Corporation Return”) for its first taxable year ended Date 4. In a letter dated Date
5, the Service stated that it was unable to process the Form 1120-IC-DISC because
Taxpayer did not have an approved Form 4876-A on file with the Service and that Form
4876-A had previously been denied. Both Taxpayer and Law Firm 2 represent that they
did not receive any notification that Form 4876-A had been denied prior to Date 5.

Taxpayer believes the reason for the denial of the Form 4876-A was an inadvertent
omission of information on the Form 4876-A as originally filed. Taxpayer relied on Law
Firm 2 to correctly prepare Form 4876-A and had no knowledge of the omission.

Law Firm 1 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) of the Internal Revenue Code (“Code”) 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) of the Code 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-104420-15 3

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.

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.
PLR-104420-15 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,


                                _____________________________________
                                Angela E. Holland
                                Acting Assistant to Branch Chief, Branch 6
                                Office of Associate Chief Counsel (International)