Corporation receives relief for a late IC-DISC election

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation and hired an accounting firm to prepare the required filings. The employee coordinating the work left before Form 4876-A was filed, while an officer believed all elections had been completed. After the corporation filed its first Form 1120-IC-DISC, the IRS notified it that the election form was missing. The IRS concluded that the corporation satisfied the discretionary-relief requirements and granted 60 days to file Form 4876-A effective for its first tax year, without deciding whether it otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

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

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201722024 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-128354-16
In re: ---------------------------- Date:
March 9, 2017

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

                                               LEGEN-D

Taxpayer = ----------------------------------------------------
Company = --------------------------
Accounting Firm = -----------------------------------------
Date 1 = -------------------
Date 2 = ----------------------
Individual = -----------------------------------------------------

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

This responds to correspondence dated September 9, 2016, and January 24, 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 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. They are subject to verification
on examination.

                                                 FACTS

Taxpayer is a domestic corporation that was formed for the purpose of qualifying and
operating as an interest charge domestic international sales corporation (“IC-

PLR-128354-16 2

DISC”). Taxpayer engaged Accounting Firm to prepare the proper paperwork to
incorporate and to file the necessary elections to qualify Taxpayer as an IC-DISC.
Taxpayer was incorporated on Date 1 and is wholly owned by Company, with which
Taxpayer has a commission arrangement.

A former employee of Taxpayer was tasked with working with Accounting Firm to timely
file the appropriate elections to treat Taxpayer as an IC-DISC. That employee left
Taxpayer on Date 2, before Form 4876-A was filed. However, Individual, an officer of
Taxpayer, believed that all appropriate paperwork, including Form 4876-A, had been
timely and properly filed.

Taxpayer filed Form 1120-IC-DISC for Taxpayer’s first taxable year. After doing so,
Taxpayer received correspondence from the Service indicating that Taxpayer had not
filed Form 4876-A. 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) of the Internal Revenue Code (“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.

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.

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.

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

PLR-128354-16 3

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
Form 4876-A and 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, 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-128354-16 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,


                                _____________________________________
                                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