Corporation gets more time for IC-DISC election

Plain-English summary

A domestic corporation was formed solely to operate as an interest charge domestic international sales corporation under a commission arrangement with its parent. Its accounting firm prepared Form 4876-A, but factors outside the corporation's control prevented timely filing. The corporation later filed Form 1120-IC-DISC and learned from the IRS that it lacked a valid election. The IRS found that the corporation satisfied the standards for discretionary filing relief. It granted 60 days to file Form 4876-A and treated that filing as a timely IC-DISC election for the corporation's first taxable year.

Ruling snapshot

• Question: May the corporation make a late Form 4876-A election for IC-DISC status in its first taxable year?
• Outcome: approved, with 60 days to file the election
• Key authorities: IRC § 992(b)(1); Temp. Treas. Reg. § 1.921-1T(b)(1); 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: 201751010                                              Third Party Communication: None
Release Date: 12/22/2017                                       Date of Communication: Not Applicable
Index Number: 9100.20-00, 992.02-00
                                                               Person To Contact:
--------------------                                           ---------------------------, ID No. ---------------
---------------------------------------------------------      -----------------
----------------------                                         Telephone Number:
--------------------------------------------                   --------------------
                                                               Refer Reply To:
In Re:----------------------------------------------------     CC:INTL:B06
----------------                                               PLR-112034-17
                                                               Date:
                                                               September 20, 2017




Taxpayer =                 ---------------------------------------------------------
Accounting Firm =          -----------------
Parent =                   ---------------------------------
Date 1 =                   ------------------
Date 2 =                   ----------------------
Date 3 =                   --------------------------
Year 1 =                   ------
Year 2 =                   ------


Dear -------------------


This responds to a letter dated March 31, 2017, supplemented by letters dated August
8, 2017, and August 30, 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 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. They are subject to
verification on examination.

                                                     FACTS

Taxpayer is a domestic corporation wholly owned by Parent. Taxpayer was formed on
Date 1 for the sole purpose of qualifying and operating as an interest charge domestic
PLR-112034-17                                         2

international sales corporation (“IC-DISC”). Taxpayer operates under a commission
arrangement with Parent. Parent is owned by five individuals and four trusts.
In Year 1, Parent engaged Accounting firm to advise on forming an IC-DISC and
prepare the necessary paperwork to qualify Taxpayer as an IC-DISC. Accounting Firm
prepared Form 4876-A and provided it to Taxpayer on Date 2. However, due to a
number of factors outside of Taxpayer’s control, Taxpayer did not timely file the Form
4876-A.

In Year 2, Taxpayer timely filed its Form 1120-IC-DISC for Year 1. In correspondence
dated Date 3, the Service notified Taxpayer that it was ineligible to file Form 1120-IC-
DISC because Taxpayer had not filed Form 4876-A.

After receiving notification that a 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
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.

1
    As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-112034-17                                    3


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 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 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, no opinion is expressed or implied concerning the tax consequences of any
aspect of any transaction or item discussed or referenced in this letter.

Pursuant to a Power of Attorney on file with this office, copies of this ruling letter are
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


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