Corporation received 60 days to file IC-DISC election

Plain-English summary

A domestic corporation was formed solely to operate as an interest charge domestic international sales corporation, and it began operating under a commission arrangement with its parent. Its accounting firm agreed to prepare Form 4876-A but failed to do so because of an inadvertent oversight. The omission was discovered while preparing the corporation’s first Form 1120-IC-DISC. The IRS concluded that the corporation satisfied the section 301.9100-3 standards and granted 60 days to file Form 4876-A, treating the election as timely for the first taxable year. The ruling did not decide whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Request: Extend the deadline to elect IC-DISC status on Form 4876-A
• Outcome: Approved; 60 days to file the election
• Key authorities: I.R.C. § 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: 201543009                                              Third Party Communication: None
Release Date: 10/23/2015                                       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
                                                               PLR-104607-15
                                                               Date:
                                                               July 23, 2015




Legend

Taxpayer =                 ---------------------------------------------------
LLC A =                    -------------------
LLC B =                    -----------------------------
Individual =               -------------------
Accounting Firm =          -------------------------------
Law Firm =                 ------------------------------------
Date 1 =                   ---------------------------
Date 2 =                   -----------------------


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

This responds to a letter dated December 31, 2014, supplemented by letters dated June
12, 2015, June 20, 2015, July 2, 2015, and July 10, 2015, 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 affidavits and penalty
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.

                                                     FACTS

Taxpayer is a domestic corporation wholly owned by LLC A, a limited liability company
classified as a partnership for federal income tax purposes. Taxpayer was formed on
PLR-104607-15                                         2

Date 1 for the sole purpose of qualifying and operating as an interest charge domestic
international sales corporation (“IC-DISC”). Taxpayer operates under a commission
arrangement with LLC A.

LLC B owns a majority interest in LLC A. Parties unrelated to one another and to
Individual own LLC B. Individual and his children beneficially own a minority interest in
LLC A. In addition, employees of LLC A own a minority interest in LLC A. These
employees are not related to Individual.

Shortly before Date 1, owners of LLC A consulted Accounting Firm about benefits that
an IC-DISC may provide. After deciding to form Taxpayer as an IC-DISC, LLC A
retained Law Firm to organize Taxpayer as a corporation. Upon formation, Taxpayer
operated as an IC-DISC. Taxpayer, Law Firm, and Accounting Firm understood that
Taxpayer was required to file Form 4876-A to operate as an IC-DISC and agreed that
Accounting Firm would prepare the form. However, due to an inadvertent oversight,
Accounting Firm failed to prepare the Form 4876-A.

In Date 2, Accounting Firm prepared Taxpayer’s first federal income tax return using
Form 1120-IC-DISC. At this time, Accounting Firm discovered that a Form 4876-A had
not been filed.

Upon discovery of this error, in order to be treated as an IC-DISC beginning on Date 1,
Taxpayer requested a ruling granting an extension of time to file Form 4876-A for its first
taxable year.

                                        LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code (the “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.

Temporary Treasury Regulation § 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-104607-15                                 3


Treasury Regulation § 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.

Treasury Regulation § 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.

Treasury Regulation § 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-104607-15                                    4


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

                                    Sincerely,


                                    _________________________
                                    Joseph P. Dewald
                                    Senior Technical Reviewer, Branch 6
                                    Office of Associate Chief Counsel (International)

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