Corporation receives 60 days to file late IC-DISC election

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation and believed it had filed Form 4876-A for its first taxable year. The IRS had no valid timely election on record, and the corporation lacked proof of mailing; a later attempt to cure a possible missing signature was also untimely. The corporation continued to operate and report as an IC-DISC before requesting discretionary relief. The IRS concluded that the corporation met the Treas. Reg. § 301.9100-3 standard and granted 60 days to file Form 4876-A, which would be treated 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

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

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201722010 Third Party Communication: None
Release Date: 6/2/2017 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-127788-16
Date:
March 07, 2017

Legend

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

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

This responds to your letter and affidavits dated August 18, 2016, supplemented by
your letter dated January 27, 2017 and your affidavit dated March 3, 2017, 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 its representatives 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.
PLR-127788-16 2

                                      FACTS

Taxpayer is a domestic corporation wholly owned by Opco. Opco is an S corporation
that is and has for several years been wholly owned by Individuals A, B, and C. Part of
their interest in Opco is held through a trust.

Taxpayer was formed on 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 Opco. Individual B has been the
President and CEO of Taxpayer throughout its existence and also the President and
CEO of Opco for several years.

Shortly before Date 1, Opco consulted with Accounting Firm about benefits that an IC-
DISC may provide. After deciding to form Taxpayer as an IC-DISC, Taxpayer retained
Law Firm to organize Taxpayer as a corporation and prepare initial filings. Accounting
Firm informed Taxpayer that Taxpayer was required to file Form 4876-A to operate as
an IC-DISC, and prepared, provided, and explained filing requirements for Taxpayer to
elect IC-DISC status as of its inception.

However, on Date 2 (after the period for filing Form 4876-A effective as of Taxpayer’s
inception), the Service notified Taxpayer that it did not have a valid IC-DISC election on
record for Taxpayer. Accounting Firm helped Taxpayer investigate. Although Taxpayer
believes that the Form 4876-A had been timely mailed to the Service, Taxpayer
acknowledges that it does not have proof of mailing the form, and the former CFO of
Opco who would have been responsible for filing it is not available to explain the
situation.

From a copy of the Form 4876-A in Taxpayer’s files, Accounting Firm surmised that the
Service may have refused to recognize the form for lack of a required signature.
Taxpayer believes that a copy of the form, now with the additional signature, was mailed
to attempt to rectify the situation. At the time, Taxpayer believed that it had rectified its
IC-DISC election effective to its inception. Taxpayer continued to operate and report as
an IC-DISC. However, the Service again notified Taxpayer that it did not have a valid
IC-DISC election on file. The Service received the Form 4876-A the second time, but it
was not timely.

As a result of the apparent lack of timely filing and unsuccessful attempts to cure the
situation, Taxpayer engaged Accounting Firm to submit a request for a ruling granting
an extension of time to file Form 4876-A for its first taxable year.
PLR-127788-16 3

                                    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.

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

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-127788-16 4

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 returns 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.

                               Sincerely,


                               _________________________
                               Marissa K. Rensen
                               Senior Counsel, Branch 6
                               Office of Associate Chief Counsel (International)

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