Corporation receives 60 days to make late IC-DISC election

Plain-English summary

A domestic corporation intended from its formation to operate as an interest charge domestic international sales corporation, or IC-DISC. Its accounting firm prepared Form 4876-A and the corporation's president signed it, but neither the firm nor the corporation filed the form because of an apparent misunderstanding. The omission came to light after the corporation filed Form 1120-IC-DISC and the IRS reported that no election form was on file. The IRS concluded that the corporation satisfied the reasonable-cause and good-faith standard in Treasury Regulation section 301.9100-3. It granted 60 days from the ruling date to file Form 4876-A, without deciding whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation receive additional time to file Form 4876-A for its first taxable year?
• Outcome: approved
• 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: 201736005                                                 Third Party Communication: None
Release Date: 9/8/2017                                            Date of Communication: Not Applicable
Index Number: 992.02-00, 9100.22-00
                                                                  Person To Contact:
-----------------------                                           ------------------------, ID No. ------------------
--------------------------------                                  ----------------------------------------------------
-------------------------------                                   Telephone Number:
----------------------------------                                ----------------------
                                                                  Refer Reply To:
                                                                  CC:INTL:B06
                                                                  PLR-105805-17
                                                                  Date:
                                                                  June 09, 2017

                                                                  TY: -------

Legend

Taxpayer =                 --------------------------------
Accounting Firm =          -------------------
Company =                  ------------------------------------
Number =                   ------
Date 1 =                   ---------------------------
Date 2 =                   -----------------------
Date 3 =                   ----------------------
Date 4 =                   ----------------------
Year 1 =                   -------

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

This responds to a letter dated February 2, 2017, supplemented by a letter dated March
31, 2017, submitted by Taxpayer and 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.

PLR-105805-17                                         2

                                                 FACTS

Taxpayer is a domestic corporation that assists Company with the export of property
under a commission arrangement. Company, a limited liability company, wholly owns
Taxpayer. Company is owned by Number members as of Date 1.

In Year 1, the officers of Company discussed forming and operating an interest charge
domestic international sales corporation (“IC-DISC”) with Accounting Firm. The officers
of Company were not familiar with IC-DISC matters and were inexperienced with
international tax matters and filings. They engaged Accounting Firm to assist with
arranging for Taxpayer to qualify as an IC-DISC, including preparation and filing of Form
4876-A. Taxpayer was incorporated on Date 2 with the sole purpose of qualifying and
operating as an IC-DISC.

Taxpayer began operating as an IC-DISC on Date 2. Accounting Firm prepared Form
4876-A for Taxpayer, which President of Taxpayer signed on Date 3. However, due to
an apparent misunderstanding, neither Accounting Firm nor Taxpayer filed the Form
4876-A.

On Date 4, Taxpayer filed its Form 1120-IC-DISC (“Interest Charge Domestic
International Sales Corporation Return”) for its taxable year ended Date 1. Taxpayer
later received correspondence from the Service stating that it had received a Form
1120-IC-DISC for Taxpayer, but had not received a Form 4876-A for Taxpayer.

After discovering that the Form 4876-A had not been filed, Taxpayer requested a ruling
granting an extension of time to file Form 4876-A for its 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.

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

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

PLR-105805-17                                 3

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 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 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.

PLR-105805-17                                  4

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,


                                       ______________________________
                                       Joseph P. Dewald
                                       Senior Technical Reviewer, Branch 6
                                       Office of Associate Chief Counsel (International)

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