Export corporation receives 60 days to file IC-DISC election

Plain-English summary

A parent formed a domestic corporation solely to operate as an interest charge domestic international sales corporation for export transactions. The parent relied on an accountant and law firm to organize the entity and file Form 4876-A, but a misunderstanding among the advisers and taxpayer left the election unfiled. The corporation filed Form 1120-IC-DISC for its first year and learned of the omission when the IRS said it had no election on file. The IRS found that the corporation met the standards for discretionary late-election relief. It granted 60 days to file Form 4876-A, which would be treated as a timely election for the corporation's first taxable year.

Ruling snapshot

• Question: May the corporation late-file Form 4876-A to elect IC-DISC treatment for its first taxable year?
• Outcome: Approved, with 60 days to file the election and attach the ruling.
• 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: 201807005 Third Party Communication: None
Release Date: 2/16/2018 Date of Communication: Not Applicable
Index Number: 9100.22-00, 992.02-00
Person To Contact:
---------------------- -----------------------, ID No. -------------------
------------------------------------- ---------------------------------------------------
----------------------- Telephone Number:
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Refer Reply To:
CC:INTL:B06
PLR-118652-17
Date:
November 20, 2017

              TY:       -------

Legend

Taxpayer = --------------------------------------
Parent = -----------------------------------------
Accounting Firm = ---------
Year 1 = -------
Accountant = ---------------------------
Law Firm = -------------------------------------
Date 1 = -------------------
Date 2 = ---------------------------

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

This responds to a letter dated May 23, 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.

                                                  FACTS

Taxpayer is a domestic corporation that operates under a commission arrangement with
Parent for the export of property. Taxpayer is wholly owned by Parent.
PLR-118652-17 2

In Year 1, the officers of Parent discussed forming and operating an interest charge
domestic international sales corporation (“IC-DISC”) with Accountant. The officers of
Parent were not familiar with IC-DISC matters and were inexperienced with international
tax matters and filings. They engaged Accountant to assist with arranging for Taxpayer
to qualify as an IC-DISC and Law Firm for the legal organization of the IC-DISC.
Taxpayer relied on Accountant and Law Firm to set up the IC-DISC, including preparing
and filing of Form 4876-A.

Taxpayer was incorporated on Date 1 with the sole purpose of qualifying and operating
as an IC-DISC. However, due to an apparent misunderstanding, neither Accountant nor
Law Firm nor Taxpayer filed the Form 4876-A.

On Date 2, Taxpayer filed its Form 1120-IC-DISC (“Interest Charge Domestic
International Sales Corporation Return”) for its first taxable year. 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
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

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-118652-17 3

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-118652-17 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,


                                   ______________________________
                                   Marissa Rensen
                                   Senior Counsel, Branch 6
                                   (International)

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

cc: