Corporation receives 60-day extension for IC-DISC election

Plain-English summary

Shareholders formed a corporation intending interest-charge DISC treatment from inception and entered a commission agreement on the formation date. The corporation's Form SS-4 also indicated that it intended to file IC-DISC returns. Although counsel told the accounting firm the Form 4876-A deadline, the firm failed to prepare and file the election because of an apparent misunderstanding. It discovered the omission and promptly sought relief. The IRS found the section 301.9100-3 requirements satisfied and granted 60 days from the ruling date to file Form 4876-A as a timely election for the corporation's first taxable year, without deciding substantive IC-DISC eligibility.

Ruling snapshot

• Question: Should the corporation receive an extension to file Form 4876-A and elect IC-DISC status for its first taxable year?
• Outcome: Approved; the corporation received 60 days to make a timely treated election.
• Key authorities: IRC § 992(b)(1); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                        Department of the Treasury
                                                                Washington, DC 20224

Number: 201604007                                               Third Party Communication: None
Release Date: 1/22/2016                                         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-114175-15
                                                                Date:
                                                                October 20, 2015


                                                       -

                                                    LEGEN-D

Taxpayer =                           ------------------
Shareholders A and B =               ------------------------------------
Shareholders C and D =               ---------------------------
Law Firm =                           --------------------
Accounting Firm =                    ------------------------------------
Business =                           --------------------------------------
State =                              -------------
Date 1 =                             -----------------------
Date 2 =                             -----------------------
Date 3 =                             -----------------

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

This replies to your representative’s letter dated April 21, 2015, by which you request on
behalf of Taxpayer an extension of time under Treas. Reg. § 301.9100-3(a) to file a
Form 4876-A (“Election to be Treated as an Interest Charge DISC”), effective as of Date
1, for Taxpayer’s first taxable year.

The rulings contained in this letter are based upon information and representations
submitted by your representative and Taxpayer, and accompanied by a penalty of
perjury statement executed by the appropriate party. This office has not verified any of
the material submitted in support of the request for rulings, and verification of the
information, representations, or other data may be required as part of a later
examination.
PLR-114175-15                                2



FACTS

Taxpayer is a Delaware corporation wholly owned by Shareholders A, B, C, and D
(collectively, “Shareholders”), who together own and operate Business in State.
Because a significant portion of Business’ production is exported, Shareholders A and B
consulted Law Firm as to the potential benefits of forming an interest-charge domestic
international sales corporation (“IC-DISC” or “DISC”). Shareholders A and B engaged
Law Firm to incorporate Taxpayer and provide related services, and relied on
Accounting Firm, which provides accounting services for Shareholders’ business
operation, to provide accounting services for Taxpayer as well.

Taxpayer was formed on Date 1 and was intended to be treated as an IC-DISC from its
inception, entering into a commission agreement with Shareholders on the same date.
Taxpayer additionally filed a Form SS-4 (“Application for Employer Identification
Number”) indicating its intent to file Form 1120-IC-DISC (“Interest Charge Domestic
International Sales Corporation Return”). Taxpayer relied on Accounting Firm to
prepare and file Form 4876-A on its behalf, and Law Firm informed Accounting Firm of
the deadline, Date 2, by which that form should have been filed.

Due to an apparent misunderstanding, Accounting Firm failed to prepare and file the
Form 4876-A for Taxpayer by the deadline. On Date 3, Accounting Firm realized that it
had not done so and promptly informed Law Firm, which prepared and submitted this
request for relief shortly thereafter.

LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code provides that an election by a
corporation to be treated as a DISC 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 the 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 the year.
PLR-114175-15                                 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 extension 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 your 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
in fact 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, and section 6110(k)(3) provides
that it may not be used or cited as precedent. Except as expressly provided, this letter
does not express or imply any opinion concerning the tax consequences of any aspect
of any transaction or item discussed or referenced in this letter.
PLR-114175-15                                    4



In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.


                                    Sincerely,


                                    _____________________________________
                                    Christopher J. Bello
                                    Chief, Branch 6
                                    Office of Associate Chief Counsel (International)




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



cc: