IRS grants 60 days to make a late IC-DISC election

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation, or IC-DISC. Its law firm sent it Form 4876-A for signature but inadvertently failed to follow up after receiving only an electronic copy, so the original election was not filed. The corporation nevertheless filed an IC-DISC return and later learned that the IRS had no approved election on file. The IRS concluded that the corporation met the standards for regulatory-election relief under Treas. Reg. § 301.9100-3 and gave it 60 days to file Form 4876-A. The ruling treats that filing as timely for the corporation's first taxable year but does not decide whether it otherwise qualifies for IC-DISC status or benefits.

Ruling snapshot

• Question: Should the corporation receive additional time to file Form 4876-A and elect IC-DISC treatment for its first taxable year?
• Outcome: Approved, with 60 days from the ruling date to file
• Key authorities: IRC § 992(b)(1)(A); 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: 201631010 Third Party Communication: None
Release Date: 7/29/2016 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
In re: ----------------------------------- PLR-141558-15
Date:
April 28, 2016

                                                      --------------

                                             LEGEND

Taxpayer = ----------------------------------------------------- -----------------
Law Firm = ---------------------------------------------------------
Company = --------------------------------------------------
Trust = -----------------------------------
Date 1 = --------------------------
Date 2 = --------------------------
Date 3 = ---------------------------
Date 4 = --------------------------

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

This responds to a letter dated December 7, 2015 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 Law Firm and accompanied by affidavits and penalties of
perjury statements executed by appropriate parties. This office has not verified any of
the materials submitted in support of the request for rulings. It is subject to verification
on examination.

                                             FACTS

PLR-141558-15 2

Taxpayer is a domestic corporation formed on Date 1 for the purpose of qualifying and
operating as an interest charge domestic international sales corporation (“IC-DISC”).
Taxpayer started doing business on Date 2. Taxpayer operates under a commission
arrangement with Company. On Date 3, Law Firm sent Form 4876-A to Taxpayer with
instructions to return the original signed form to Law Firm. Law Firm did not receive the
signed original form, but did receive an electronic copy of the signed original form.
While Law Firm has the practice to inform clients if Law Firm does not receive a signed
original Form 4876-A within a reasonable time, in this case Law Firm inadvertently failed
to do so.

Believing all the requirements to conduct business and be treated as an IC-DISC were
satisfied, Taxpayer filed Form 1120-IC-DISC for its first taxable year. Taxpayer
received correspondence from the Service dated Date 4 that Taxpayer was ineligible to
file Form 1120-IC-DISC because the Service did not have an approved Form 4876-A.

As a result, Taxpayer has requested a ruling that grants an extension of time to file
Form 4876-A effective Date 2.

                                    LAW AND ANALYSIS

Section 992(b)(1)(A) 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.

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 shall 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.

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

PLR-141558-15 3

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.

In the present situation, 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 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
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
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.

PLR-141558-15 4

Pursuant to a Power of Attorney on file in this office, copies of this ruling letter are being
furnished to your authorized representatives.

                                Sincerely,


                                _____________________________________
                                Marissa K. Rensen
                                Senior Counsel, Branch 6
                                Office of Associate Chief Counsel (International)

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