Corporation receives more time to elect IC-DISC status

Plain-English summary

A corporation was formed to operate as an interest charge domestic international sales corporation and hired an accounting firm to prepare its election. The completed but unsigned Form 4876-A was placed in internal tax records instead of being filed because of a misunderstanding. The accounting firm also filed an ordinary corporate return for the first short tax year rather than an IC-DISC return. After the IRS reported that it had no record of the election, the corporation sought relief. The IRS concluded that the regulatory-election standards were met and gave the corporation 60 days to file Form 4876-A, which would be treated as timely for its 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 file its Form 4876-A after the 90-day deadline for its first taxable year?
• Outcome: approved, with 60 days to file the election
• Key authorities: IRC § 992(b); 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: 201714013 Third Party Communication: None
Release Date: 4/7/2017 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-121811-16
Date:
January 03, 2017

                                                           TY:-------

Legend

Taxpayer = ------------------------------------------
Accounting Firm = -----------------------------------
Law Firm = ----------------------
Company = ---------------
Date 1 = --------------------------
Date 2 = --------------------------
Year 1 = ------
Year 2 = ------
Individual A = -------------------
Individual B = -----------------
Shareholder A = ----------------------------------------------------
Shareholder B = ------------------------------------------

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

This responds to a letter dated June 10, 2016, supplemented by a letter dated
November 14, 2016, submitted by your representatives 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 Year 1, Taxpayer’s first taxable year.

The ruling contained in this letter is based upon information and representations
submitted by Taxpayer and accompanied by affidavits and penalty of perjury statements
executed by appropriate parties. This office has not verified any of the materials

PLR-121811-16 2

submitted in support of the request for a ruling. It is subject to verification on
examination.
FACTS

On Date 1, Taxpayer was formed to serve as an interest charge domestic international
sales corporation (“IC-DISC”). Taxpayer is a domestic corporation that is owned by
Individual A and Individual B. Company is a domestic corporation owned by Individual
A, Individual B, Shareholder A, and Shareholder B. Shareholder A and Shareholder B
are grantor trusts of which the grantors are Individual A and Individual B, respectively.
Individual A and Individual B are not related to each other.

In Year 1, Taxpayer engaged Accounting Firm to complete and file Form 4876-A on
Taxpayer’s behalf. Accounting Firm delivered a complete, but unsigned, Form 4876-A
to Taxpayer’s CFO, who in turn delivered it to Taxpayer’s office manager with the
instruction to file the form. However, due to a misunderstanding, the Form 4876-A was
placed in Taxpayer’s internal tax records but never submitted to the Service. As a
result, the Form 4876-A was not filed within 90 days after Date 1.

Accounting Firm was instructed to file Taxpayer’s Year 1 tax return for the short taxable
year starting Date 1, and ending Date 2. Accounting Firm mistakenly filed a Form 1120,
rather than a Form 1120-IC-DISC.

Taxpayer, assuming that Form 4876-A had been timely filed, filed Form 1120 IC-DISC
for Year 2 with the Service. Taxpayer subsequently learned, via a Form 6800sc, that
the Service had no record of the filing of a Form 4876-A. Taxpayer then instructed Law
Firm to file a request for a ruling granting an extension of time to file Form 4876-A for
Year 1, its first taxable year.

                                    LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code1 provides that an election by a
corporation to be treated as a DISC2 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 such first day of the first taxable year for which such election is
effective consent to such election.

1
All section references are to the Internal Revenue Code.
2
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.

PLR-121811-16 3

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.

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.

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
Form 4876-A and Federal income tax return for the taxable years to which this letter
applies.

PLR-121811-16 4

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.

                              Sincerely,


                              _____________________________________
                              Robert Z. Kelley
                              Assistant to the Branch Chief, Branch 6
                              Office of Associate Chief Counsel (International)

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