Corporation receives more time to elect IC-DISC status

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation and hired an accounting firm to complete the election. The firm prepared Form 4876-A, but an administrative error prevented the corporation's president from signing and filing it within the first-year 90-day deadline. The IRS concluded that the corporation met the good-faith requirements for regulatory-election relief and granted 60 days to file the form. The ruling treated that filing as timely but did not decide whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation file Form 4876-A late to elect IC-DISC status for its first taxable year?
• Outcome: Approved, with a 60-day extension
• Key authorities: IRC § 992(b); Temp. Treas. Reg. § 1.921-1T; Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201633007 Third Party Communication: None
Release Date: 8/12/2016 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-106539-16
Date:
May 18, 2016

                                                           TYE: ---------------------------

Legend

Taxpayer = ----------------------------------------------
Accounting Firm = ----------------------------
Company = ----------------------------
Date 1 = -----------------
Year 1 = -------

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

This responds to a letter dated February 16, 2016 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 Year 1, Taxpayer’s first taxable year.

The ruling contained in this letter is based upon information and representations
submitted by Taxpayer and 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.
PLR-106539-16 2

                                             FACTS

Taxpayer is a domestic corporation that is wholly-owned by Company, a domestic
partnership owned by U.S. persons. In Year 1, Company decided to establish Taxpayer
as an interest charge domestic international sales corporation (“IC-DISC”) and sell food
products distributed by Company on a commission basis.

Taxpayer was formed on Date 1 and engaged Accounting Firm to perform all necessary
steps and prepare all necessary forms to qualify Taxpayer as an IC-DISC. Accounting
Firm prepared and delivered Form 4876-A to Taxpayer to be signed by the President of
Company and Taxpayer. However, due to an administrative error, the form was not
provided to the President and was misplaced. As a result, the President was unable to
sign and file the Form 4876-A within 90 days after Date 1.

After Accounting Firm had prepared the Form 1120 IC-DISC for Year 1 based on the
assumption that Form 4876-A had been timely filed, Taxpayer received a notice from
the Service indicating that it had no record of the filing. Accounting Firm then informed
Taxpayer that the only option was to file a request for relief under Treasury Regulation §
301.9100-1(c).

Taxpayer represents that (1) the extension will not result in Taxpayer having a lower tax
liability in the aggregate for all taxable years affected by the election than Taxpayer
would have had if the election had been timely made and (2) the taxable years affected
by the election are not closed by the period of limitations on assessment under section
6501(a).

As noted above, Taxpayer requested a ruling granting an extension of time to file Form
4876-A for Year 1, its first taxable year.

                                    LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code1 provides that an election by a
corporation to be treated as a DISC2 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.

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
All section references are to the Internal Revenue Code.
2
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-106539-16 3

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.

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.

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.
PLR-106539-16 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. 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.

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

                               Sincerely,


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

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