Extension granted to complete IC-DISC election

Plain-English summary

A newly formed domestic corporation intended to elect interest charge domestic international sales corporation status for its first tax year. Its president timely filed Form 4876-A but signed only as the corporation's officer and omitted the separate shareholder consent signature. The corporation continued operating and filing returns as an IC-DISC while its advisers repeatedly resubmitted the incomplete form. After the error was recognized, the IRS found that the corporation met the regulatory standards for relief and granted 90 days to file a properly completed Form 4876-A. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation receive additional time to complete its Form 4876-A election for IC-DISC treatment from its first tax year?
• Outcome: Approved, with 90 days to file the election
• Key authorities: IRC §§ 992(b) and 996(g); Temp. Treas. Reg. § 1.921-1T; 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: 202347010                                             Third Party Communication: None
 Release Date: 11/24/2023                                      Date of Communication: Not Applicable
 Index Number: 992.02-00, 9100.22-00
                                                               Person To Contact:
 ---------------------------------------------                 -----------------------, ID No. -------------------
 ------------------------                                      ---------------------------------------------------
 -----------------------------                                 Telephone Number:
 --------------------------------------                        ---------------------
                                                               Refer Reply To:
                                                               CC:INTL:B06
                                                               PLR-107850-23
                                                               Date:
                                                               August 25, 2023



Legend

 Taxpayer                =   ---------------------------------------------
 Shareholder             =   ------------------------------
 Individual              =   ----------------
 Accounting Firm         =   -----------------
 Law Firm                =   ------------------------------------
 Date 1                  =   -------------------------
 Date 2                  =   -----------------------
 Date 3                  =   -------------------
 Date 4                  =   --------------------------
 Date 5                  =   --------------------------
 Year 1                  =   -------
 Year 2                  =   -------

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

This responds to a letter dated April 3, 2023, submitted by your representatives,
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 ruling contained in this letter is based upon information and representations
submitted by Taxpayer and its representatives, 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, which are subject to
verification on examination.
PLR-107850-23                                2

                                         FACTS

Taxpayer was incorporated on Date 1 to operate as an interest charge domestic
international sales corporation (“IC-DISC”). Taxpayer is a domestic corporation wholly
owned by Shareholder, which is classified as a partnership for Federal income tax
purposes. Individual is President of both Taxpayer and Shareholder.

During Year 1, Individual, on the recommendation of Accounting Firm, engaged Law
Firm to advise and assist with incorporating Taxpayer and fulfilling the requirements for
Taxpayer to operate as an IC-DISC. Individual represents that, at all relevant times,
Individual and Taxpayer relied on Accounting Firm and Law Firm to organize and
prepare the necessary documentation for Taxpayer to be treated as an IC-DISC.

Following Taxpayer’s incorporation, Law Firm prepared Form 4876-A for Individual to
execute and file with the Service. On Date 2 (less than 90 days after Date 1), Individual
filed what purported to be an executed Form 4876-A with the Service. However, while
Individual properly executed Part I (“Signature and Title of Officer”) of the Form 4876-A,
signing the form as an officer of Taxpayer, Individual failed to execute Part II
(“Shareholders’ Consent Statement”) of the Form 4876-A, in which the electing entity’s
shareholder(s) (or here, Individual in his capacity as an owner and officer of
Shareholder) must sign the form to reflect their consent to the election. At all relevant
times, Taxpayer operated as if it were a validly elected IC-DISC.

In correspondence dated Date 3, the Service informed Taxpayer that it had not received
a properly executed Form 4876-A and requested that Taxpayer submit a properly
executed consent statement from Taxpayer’s shareholder(s). Accounting Firm,
responding on behalf of Taxpayer, submitted to the Service a copy of the Form 4876-A
filed by Individual, on the mistaken belief that it was fully and properly executed.

Thereafter, Taxpayer filed its Federal income tax return for Year 1 as an IC-DISC. In
correspondence dated Date 4, the Service informed Taxpayer that it could not process
Taxpayer’s return because it did not have an approved Form 4876-A on file. Accounting
Firm, responding on behalf of Taxpayer, again submitted to the Service a copy of the
Form 4876-A filed by Individual.

Thereafter, Taxpayer filed its Federal income tax return for Year 2 as an IC-DISC. In
correspondence dated Date 5, the Service again informed Taxpayer that it could not
process Taxpayer’s return because it did not have an approved Form 4876-A on file.
After receiving this notice, Individual recognized the error with the original Form 4876-A
submission, and directed Law Firm, on behalf of Taxpayer, to file the request that is the
subject of this ruling.
PLR-107850-23                                3

                                           LAW

Section 992(b)(1)(A) of the Internal Revenue Code (the “Code”) 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 her
consent to the making of an election at such other times as she may designate.
Section 992(b)(1)(B) of the Code provides that the 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 the 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 may, in exercising
his discretion, 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 the due
date for which 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, and that
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.

                                       ANALYSIS

Here, Taxpayer seeks relief to make the election described in Temp. Treas. Reg.
§ 1.921-1T(b)(1), which 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, to make such
election.
PLR-107850-23                                        4


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.

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. 1

In accordance with section 996(g), Taxpayer should not accept any income tax treaty
claims of reduced withholding under sections 1441 or 1442 with respect to distributions
(deemed or otherwise) of accumulated DISC income.

Taxpayer should attach a copy of this ruling letter to its Form 4876-A and Federal
income tax return for the taxpayer years to which this letter applies (and any other
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.

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, copies of this letter are
being sent to your authorized representatives.



                                             Sincerely,



                                             Brad McCormack
                                             Senior Technician Reviewer, Branch 6
                                             (International)

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



1
    For example, no opinion is expressed regarding the consequences to any person under section 996(g).
PLR-107850-23                                          5

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