An internal error qualified for late IC-DISC election relief

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation, or IC-DISC. Its accounting firm supplied Form 4876-A and filing instructions, but the corporation failed to mail the form because of an internal miscommunication and administrative error. The omission was discovered after the IRS rejected the corporation's IC-DISC return because no election was on file. The IRS found that the corporation met the standards for discretionary late-election relief and granted 60 days to file Form 4876-A. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation file Form 4876-A late after an internal administrative error?
• Outcome: Approved, with 60 days from the ruling date to file.
• 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: 201745003                                              Third Party Communication: None
Release Date: 11/9/2017                                        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-106079-17
In re: ----------------------------                            Date:
                                                               August 10, 2017




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

                                                    LEGEND

Taxpayer =                 ----------------------------------------------------
Company =                  -------------------------
Affiliate 1 =              --------------------
Affiliate 2 =              ------------------
Accounting Firm =          ----------------------
Date 1 =                   ----------------------
Date 2 =                   ------------------------
Date 3 =                   ----------------------
Date 4 =                   ---------------------------

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

This responds to correspondence dated February 8, 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 Accounting Firm 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
PLR-106079-17                                         2


Taxpayer is a domestic corporation that was formed on Date 1 for the purpose of
qualifying and operating as an interest charge domestic international sales corporation
(“IC-DISC”). Taxpayer is wholly owned by Company and has a commission
arrangement with Affiliate 1 and Affiliate 2. Taxpayer retained Accounting Firm to assist
in Taxpayer’s qualification as a DISC. On or around Date 2, Accounting Firm provided
copies of Form 4876-A to Taxpayer with instructions to sign and mail the form on or
before Date 3.

Taxpayer failed to file Form 4876-A due to an internal miscommunication and
administrative error. In addition, Taxpayer does not have in-house personnel dedicated
to the administration of tax compliance, and the election was unfamiliar to Taxpayer.

Taxpayer and Accounting Firm were unaware that Taxpayer had failed to timely file
Form 4876-A. Taxpayer filed Form 1120-IC-DISC for Taxpayer’s first taxable year
ending on Date 4. After doing so, Taxpayer received correspondence from the Service
indicating that Taxpayer was ineligible to file Form 1120-IC-DISC because 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.




1
    As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-106079-17                                 3

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.

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-106079-17                                    4


Pursuant to a Power of Attorney on file in this office, a copy of this ruling letter is being
furnished to your authorized representatives.


                                    Sincerely,


                                    _____________________________________
                                    Christopher J. Bello
                                    Chief, Branch 6
                                    Office of Associate Chief Counsel (International)

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



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