Late IC-DISC election granted after incomplete filing

Plain-English summary

A newly formed domestic corporation intended to operate as an interest charge domestic international sales corporation from its formation date. It mailed Form 4876-A within the 90-day period, but the form lacked the required officer signature, and the company later learned that the IRS did not regard its election as valid. The company had entered an IC-DISC commission agreement and timely filed its first IC-DISC return in reliance on the intended election. The IRS found the regulatory-election relief standards satisfied and granted 60 days to file a valid Form 4876-A, which would be treated as timely for the first taxable year. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation file a late valid Form 4876-A for its first taxable year?
• Outcome: Approved, with 60 days to complete the IC-DISC election
• 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: 201535001
Third Party Communication: None
Release Date: 8/28/2015
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-101758-15
Date:
May 29, 2015

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

LEGEN-D

Taxpayer = --------------------------------------------------------
Law Firm = ------------------------------
Individual 1 =------------------------------------
Individual 2 = ----------------
Individual 3 = -------------------------
Company = ------------------------------
Date 1 = ------------------
Date 2 = -----------------
Date 3 = -----------------------

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

This responds to a letter dated December 19, 2014, supplemented by a letter dated May 20, 2015, submitted by Law 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 Law Firm and accompanied by affidavits and penalties 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-101758-15
2

FACTS

Taxpayer is a domestic corporation owned by Individual 1, Individual 2, and Individual 3. Taxpayer was formed for the purpose of qualifying and operating as an interest charge domestic international sales corporation (“IC-DISC”). Taxpayer operates under a commission arrangement with Company.

Taxpayer was formed on Date 1, and intended to be treated as an IC-DISC starting from its formation. Demonstrating this intention, Taxpayer entered into an IC-DISC commission agreement with Company on Date 1. Taxpayer prepared Form 4876-A, Part II of which was signed by Individual 1, Individual 2, and Individual 3 on Date 2. Taxpayer inadvertently failed to have an officer sign Part I of Form 4876-A. Taxpayer mailed Form 4876-A within 90 days of Date 1 by regular postal mail.

Believing all the requirements to conduct business and be treated as an IC-DISC for its first taxable year were satisfied, Taxpayer began acting as an IC-DISC as of its date of formation and timely filed Form 1120-IC-DISC for Taxpayer’s first taxable year. Taxpayer received correspondence from the Service dated Date 3 that Taxpayer was ineligible to file Form 1120-IC-DISC because Taxpayer did not reply to previous correspondence requesting a timely Form 4876-A. Taxpayer believes that it never received such correspondence.

As a result, 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 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.

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-101758-15
3

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.

In the present situation, the election described in 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 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-101758-15
4

Pursuant to a Power of Attorney on file in this office, copies of this ruling letter are being furnished to your authorized representatives.

Sincerely,

_______
Anne P. Shelburne
Senior Counsel, Branch 6
Office of Associate Chief Counsel (International)

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