Corporation receives 90 days to make late IC-DISC election

Plain-English summary

A corporation was formed to operate as an interest charge domestic
international sales corporation and attempted to file Form 4876-A for its first
tax year. The filing was outside the normal 90-day window and also lacked an
officer's signature, so the election was invalid. The company did not receive
an earlier IRS notice requesting information, believed it had valid IC-DISC
status, conducted business on that basis, and filed Form 1120-IC-DISC. It
discovered the problem only after the IRS said the return could not be
processed. The IRS found that the regulatory relief standards were satisfied
and granted 90 days to file Form 4876-A. A filing within that period would be
treated as a timely election for the corporation's first tax year, but the
ruling did not decide whether the corporation otherwise qualified for IC-DISC
status or benefits.

Ruling snapshot

• Question: May a corporation make a late IC-DISC election after its
  attempted Form 4876-A was untimely and missing an officer's signature?
• Outcome: Approved. The corporation received a 90-day extension.
• 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: 202314001 Third Party Communication: None
Release Date: 4/7/2023 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-111058-22
Date:
January 09, 2023

Legend

Taxpayer = ------------------------------------
Law Firm = ----------------------------
Date 1 = ------------------------
Date 2 = ------------------------
Date 3 = ---------------------------
Date 4 = --------------------------
Date 5 = -----------------------
Individual A = --------------------
Individual B = ---------------------
Individual C = ----------------------------
Individual D = ----------------
Individual E = ----------------
Individual F = --------------------
Individual G = -------------------
Company A = ---------------------------------
Year 1 = -------
Year 2 = -------

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

This responds to a letter dated May 20, 2022, supplemented with a letter dated
December 6, 2022, submitted by your representative requesting that the Internal
Revenue Service (“IRS”) 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 Year 1.

PLR-111058-22 2

The ruling contained in this letter is based upon information and representations
submitted by Taxpayer and Law Firm, 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 a ruling. It is subject to verification on
examination.

                                      FACTS

Taxpayer was incorporated on Date 1 as an interest charge domestic international sales
corporation (“IC-DISC”). Taxpayer represents that it did not conduct any operations
until the following year, Year 2. Taxpayer is a domestic corporation owned by Individual
A, Individual B, Individual C, Individual D, Individual E, Individual F, Individual G, and
Company A. Individual A is the Chief Financial Officer of Taxpayer. On Date 2, Law
Firm, under Taxpayer’s instructions, filed Form 4876-A (“Election To Be Treated as an
Interest Charge DISC”) with the IRS on behalf of Taxpayer. The attempted election was
not made within 90 days after the beginning of Year 1. Law Firm received confirmation
that the Form 4876-A had been received by the IRS. Taxpayer assumed that it had
completed all of the requirements necessary to operate as an IC-DISC and conducted
its business as if it was an IC-DISC. Believing that it was an IC-DISC, Taxpayer filed an
initial return, a Form 1120-IC-DISC, with the IRS on Date 3.

Even though Taxpayer assumed that it had met all the requirements to conduct
business as an IC-DISC, it did not qualify as an IC-DISC for federal income tax
purposes because the election was not timely filed. Additionally, the Form 4876-A that
was filed with the IRS was missing an officer’s signature and, therefore, was invalid.
Taxpayer represents that it did not realize the error regarding the missing signature until
it received a notice from the IRS dated Date 4, stating that Taxpayer’s Form 4876-A
could not be processed, and that Taxpayer was not eligible for IC-DISC status. The IRS
letter stated that Taxpayer had failed to respond to previous correspondence requesting
information needed to process the form. Taxpayer represents that it never received the
previous notice and therefore could not correct the error.

Taxpayer asked Law Firm to assist with responding to the IRS notice. Law Firm
contacted the IRS and exchanged several phone calls with the IRS. Law Firm learned
that Taxpayer’s Form 4876-A that was filed with the IRS could not be processed
because it was missing an officer’s signature. Taxpayer and Law Firm examined and
confirmed that the Form 4876-A was missing an officer’s signature. The IRS was
unable to provide a copy of the previous notice sent to Taxpayer, and instead sent
another notice to Taxpayer on Date 5, explaining that the IRS had received the Form
1120-IC-DISC but could not process it because the IRS had not approved Taxpayer’s
Form 4876-A. Law Firm filed a request on behalf of Taxpayer, to be allowed to make a
late election to be treated as an IC-DISC beginning on Date 1.

                              LAW AND ANALYSIS

PLR-111058-22 3

Section 992(b)(1)(A) provides that an election by a corporation to be treated as an
IC-DISC 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) provides that the election shall be made in the 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 must 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.

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.

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 90 days from the date of this ruling letter to file
Form 4876-A. Such filing will be considered a timely election to be treated as an
IC-DISC for Taxpayer’s first taxable year.

PLR-111058-22 4

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

                                   Sincerely,



                                   Angela E. Holland
                                   Senior Counsel, Branch 6
                                   (International)

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

cc: