Corporation receives 90 days to perfect its IC-DISC election

Plain-English summary

A corporation formed to operate as an interest charge domestic international sales corporation mailed Form 4876-A within the first tax year's 90-day election period. Its tax professional did not advise using certified mail, and the IRS later reported that it had no record of receiving the election. The corporation filed IC-DISC returns for three years and repeatedly tried to resolve the missing form before the IRS advised it to request discretionary relief. The IRS concluded that the corporation satisfied the section 301.9100-3 standards and granted 90 days to file Form 4876-A. The filing will be treated as a timely IC-DISC election for the corporation's first taxable year, but the ruling does not decide whether the corporation otherwise qualifies for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation replace a missing Form 4876-A and have its IC-DISC election treated as timely from its first tax year?
• Outcome: Approved, with 90 days to file Form 4876-A
• 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: 202314013                                             Third Party Communication: None
 Release Date: 4/7/2023                                        Date of Communication: Not Applicable
 Index Number: 992.02-00
                                                               Person To Contact:
 ---------------------------------------------------------     --------------------------, ID No. ---------------
 ------------------------------                                Telephone Number:
 -----------------------------------                           --------------------
 -------------------------------                               Refer Reply To:
                                                               CC:INTL:B06
                                                               PLR-115154-22
                                                               Date:
                                                               December 29, 2022


                       TY: -------

Legend

 Taxpayer                =   ---------------------------------------------------------
 Shareholder             =   ----------------------------------------
 Date 1                  =   --------------------------
 Date 2                  =   --------------------------
 Date 3                  =   -------------------------
 Date 4                  =   ------------------------
 Date 5                  =   ---------------------------
 Date 6                  =   ------------------
 Date 7                  =   ---------------------------
 Date 8                  =   --------------------------
 Date 9                  =   -----------------------
 Date 10                 =   ------------------------
 Date 11                 =   ------------------
 Individual A            =   -----------------
 Individual B            =   ------------------------
 Accounting Firm         =   -------------------------
 Year 1                  =   -------
 Year 2                  =   -------
 Year 3                  =   -------
 Month 1                 =   ---------------------
 Month 2                 =   ------------------


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

This responds to your letter dated August 5, 2022 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.

                                        FACTS

On Date 1, Taxpayer was incorporated to operate as an interest charge domestic
international sales corporation (“IC-DISC”). Taxpayer is a domestic corporation wholly
owned by Shareholder. Shareholder is treated as an S corporation for Federal income
tax purposes.

Individual A is the Chief Financial Officer of both Taxpayer and Shareholder. Individual
B is a qualified tax professional employed at Accounting Firm. Individual A engaged
Individual B to prepare the documentation for Shareholder to form Taxpayer and qualify
Taxpayer as an IC-DISC. On Date 2, Individual A received Form 4876-A from Individual
B, but Individual B did not advise Individual A to send Form 4876-A by certified mail
return receipt requested. On Date 2, which was within 90 days after the beginning of
Taxpayer’s first taxable year, Individual A mailed a signed Form 4876-A to the Service,
but did not send the Form 4876-A by certified mail return receipt requested.

During Year 2, Taxpayer timely submitted Form 1120-IC-DISC for Taxpayer’s first
taxable year. On Date 3, less than one year after Taxpayer filed Form 4876-A and
shortly after Taxpayer filed Form 1120-IC-DISC, the Service notified Taxpayer that the
Service did not have any record of Form 4876-A having been filed and therefore the
Service could not process Taxpayer’s Form 1120-IC-DISC for Taxpayer’s first taxable
year.

During the period from Month 1 to Month 2, Accounting Firm sent letters and made
phone calls to the Service on behalf of Taxpayer to try and resolve the issue of why the
Service had not processed Taxpayer’s Form 4876-A. On Date 4, the Service
responded to Accounting Firm’s first letter and notified Taxpayer that the Service was
investigating the matter. On Date 5, the Service sent a second response to Accounting
Firm’s first letter stating that the Service needed more time to investigate the matter.

During the period from Month 1 to Month 2, Accounting Firm prepared Form 1120-IC-
DISC for Taxpayer’s Year 2 and Year 3 taxable years, and Taxpayer timely filed such
Forms. On Date 6 and Date 7, the Service sent notices to Taxpayer stating that the
Service could not process Taxpayer’s Form 1120-IC-DISC for Year 2 because the
Service had no record of Taxpayer filing Form 4876-A. On Date 8 and Date 10, the
Service sent notices to Taxpayer stating that the Service could not process Taxpayer’s
Form 1120-IC-DISC for Year 3 because the Service had no record of Taxpayer filing
Form 4876-A.

On Date 9, the Service called an employee of Accounting Firm and told the employee
that Taxpayer would have to file a request for an extension of time to file Form 4876-A
under Treas. Reg. §§301.9100-1 and 301.9100-3 in order for Taxpayer to be treated as
an IC-DISC beginning in its first taxable year. Having been unsuccessful in resolving
with the Service the issue of Taxpayer’s Form 4876-A, on Date 11 Accounting Firm
recommended Taxpayer engage legal counsel and request an extension of time under
Treas. Reg. §§301.9100-1 and 301.9100-3 to file Form 4876-A. In conjunction with this
request, Taxpayer, Shareholder, and the owners of Shareholder all executed Forms 872
(“Consent to Extend the Time to Assess Tax”) for Year 2 and all provided
representations that Taxpayer had no gross income or deductions in Year 1.

                                            LAW

Section 992(b)(1)(A) of the Internal Revenue Code (the “Code”) provides that an
election by a corporation to be treated as a 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) 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.

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.

Treasury Regulation § 301.9100-3(b)(1)(v) provides that a taxpayer is generally deemed
to have acted reasonably and in good faith if the taxpayer reasonably relied on a
qualified tax professional, including a tax professional employed by the taxpayer, and
the tax professional failed to make, or advise the taxpayer to make, the election.

                                        ANALYSIS

Based on the facts and representations submitted with Taxpayer's ruling request and
subsequent additional information requests, 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 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). 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.

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date and control number of the
letter ruling.
The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

                                       Sincerely,

                                  By: ___________________
                                      for Frank W. Dunham III
                                      Branch Chief, Branch 6
                                      (International)




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