IC-DISC received 90 days to file its late 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 tax consultant prepared Form 4876-A and delivered it to the corporation's treasurer, but the treasurer inadvertently failed to file it within 90 days after incorporation. The IRS later informed the corporation that it had no approved election on file. The corporation requested regulatory relief, relying on the consultant's work and the inadvertent filing oversight. The IRS found that the requirements of Treasury Regulation section 301.9100-3 were satisfied and granted 90 days from the ruling date to file Form 4876-A as a timely first-year election. The ruling did not decide whether the corporation otherwise qualified for IC-DISC status or benefits and warned against accepting reduced treaty withholding on distributions of accumulated DISC income.

Ruling snapshot

• Question: May the corporation receive extra time to file Form 4876-A and elect IC-DISC status for its first taxable year?
• Outcome: Approved, with 90 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: 202349008 Third Party Communication: None
Release Date: 12/8/2023 Date of Communication: Not Applicable
Index Number: 9100.00-00, 992.02-00
Person To Contact:
--------------------- ----------------------, ID No. -----------------

---------------------- Telephone Number:
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Refer Reply To:
CC:INTL:B06
In Re: ------------------------ PLR-106146-23
Date:
September 11, 2023

                                                    TY: ------

Legend

Taxpayer = ------------------------
Tax Consultant = -------------------
Company = -----------------------------------
Foreign Owner = -------------------------------------------
Individual = ---------------------
Country A = ------------
Month 1 = ---------------------
Date 1 = ---------------------
Date 2 = -------------------------
Date 3 = -------------------------
Date 4 = -------------------------
Year 1 = -------

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

This responds to correspondences dated March 17, 2023, and June 5, 2023, submitted
by Tax Consultant 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.
PLR-106146-23 2

                                             FACTS

Taxpayer and Company are domestic corporations wholly owned by Foreign Owner, a
foreign entity organized in Country A. Taxpayer was formed to serve as an interest
charge domestic international sales corporation (“IC-DISC”) and has established a
commission arrangement with Company. Company employs Individual as Chief
Financial Officer, while Taxpayer employs Individual as Treasurer.

In Month 1, Company decided to establish an IC-DISC and engaged Tax Consultant to
organize and prepare all documents and filings needed to establish Taxpayer as in IC-
DISC. On Date 1, Taxpayer was incorporated with Tax Consultant’s assistance.

Tax Consultant completed Form 4876-A and emailed a copy to Individual on Date 2.
The Form 4876-A was delivered to Taxpayer and Individual on Date 3. Due to an
inadvertent oversight by Individual, the Form 4876-A was not filed within 90 days after
Date 1.

In correspondence dated Date 4, the Service informed Taxpayer that an approved
Form 4876-A was not on file.

Tax Consultant submitted this request for relief on behalf of Taxpayer under Treas. Reg.
§ 301.9100-3 for an extension of time to file Form 4876-A for Year 1, Taxpayer’s first
taxable year.

                                    LAW AND ANALYSIS

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 1 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 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.

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-106146-23 3

Treasury Regulation § 301.9100-1(c) gives the Commissioner discretion to 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.

                                        CONCLUSION

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 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. 2

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

2
For example, no opinion is expressed regarding the consequences to any person under section 996(g).
PLR-106146-23 4

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 Taxpayer and Tax Consultant and accompanied by affidavits and penalty
of perjury statements executed by appropriate parties. This office has not verified any of
the material submitted in support of the request for rulings. It is subject to verification
upon examination.

                                             Sincerely,


                                             _____________________________________
                                             L. Ulysses Chatman
                                             Senior Counsel, Branch 6
                                             Office of Associate Chief Counsel (International)

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

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