Corporation receives 60 days to correct its IC-DISC election

Plain-English summary

A domestic corporation intended to elect interest charge domestic international sales corporation (IC-DISC) status from its formation. Its accounting and law firms miscommunicated about ownership, causing Form 4876-A to identify the wrong owner, although the IRS accepted the form. The corporation filed an IC-DISC return for its first tax year, and the advisers later discovered the discrepancy. The IRS found that the corporation met the standards for discretionary election relief and granted 60 days to file a corrected Form 4876-A. The corrected filing would be treated as a timely IC-DISC election for the first tax year, but the ruling did not decide whether the corporation was substantively eligible for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation correct a timely but inaccurate Form 4876-A that named the wrong IC-DISC owner?
• Outcome: approved
• Key authorities: IRC § 992(b); Temp. Treas. Reg. § 1.921-1T(b); Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201726009                                              Third Party Communication: None
Release Date: 6/30/2017                                        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
In Re: ---------------------------------------------------- PLR-135677-16
------------------------                                    Date:
                                                            April 4, 2017




                                                               TY: ------

Legend

Taxpayer =                 ----------------------------------------------------------------------
Accounting Firm =          ----------------------
Law Firm =                 --------------------------
Parent =                   ----------------------------------------------------
Date 1 =                   -------------------

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

This responds to a letter dated October 12, 2016, 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 penalties of perjury
statements executed by the 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 wholly owned by Parent. Taxpayer was
incorporated on Date 1, and Taxpayer intended to be treated as an interest charge
domestic international sales corporation (“IC-DISC”), beginning on Date 1. Parent relied
on Accounting Firm for advice and assistance with arranging for Taxpayer to qualify as
PLR-135677-16                                         2

an IC-DISC, including preparation and filing of Form 4876-A. Parent also engaged Law
Firm to handle corporate formation documentation. Due to a miscommunication
between Accounting Firm and Law Firm regarding the ownership of Taxpayer, Form
4876-A listed the wrong entity as the owner of the IC-DISC. This incorrectly-filed
Form 4876-A was accepted by the IRS.

Taxpayer filed Form 1120-IC-DISC (“Interest Charge Domestic International Sales
Corporation Return”) for its first taxable year. Based on discrepancies in the advice that
they were providing to Taxpayer, Accounting Firm and Law Firm later discovered that
Form 4876-A incorrectly identified the owner of Taxpayer. Accounting Firm submitted
this request for relief on behalf of Taxpayer under Treas. Reg. § 301.9100-3 for an
extension of time to file a correct Form 4876-A.

                                        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.

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.




1
    As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-135677-16                                    3

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
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 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.

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


                                    Sincerely,

                                    _____________________________________
                                    Christopher J. Bello
                                    Branch Chief, Branch 6
                                    Office of Associate Chief Counsel (International)
Enclosures (2)
Copy of this letter
Copy for § 6110 purposes