Corporation receives more time to file its IC-DISC election

Plain-English summary

A domestic corporation formed to serve as an interest charge domestic international sales corporation failed to file Form 4876-A for its first taxable year. Its accounting firm had agreed to prepare the election but did not timely do so, and the problem was discovered when the IRS returned the corporation's Form 1120-IC-DISC. The IRS concluded that the corporation satisfied the reasonable-cause and good-faith standard in Treas. Reg. § 301.9100-3. It granted 60 days from the ruling date to file the election, without deciding whether the corporation otherwise qualified for IC-DISC treatment.

Ruling snapshot

• Question: May the corporation receive an extension to file Form 4876-A 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. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201634002 Third Party Communication: None
Release Date: 8/19/2016 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-103181-16
Date:
May 23, 2016

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

Legend

Taxpayer = -------------------------------------
Accounting Firm = ---------------
Company = -------------------------------
Date 1 = ---------------------------
Date 2 = ------------------------
Date 3 = ----------------------------
Date 4 = ---------------------------
Date 5 = ---------------------------

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

This responds to a letter dated December 13, 2015, submitted by Accounting Firm on
behalf of Taxpayer 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 Accounting Firm 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. They are subject to
verification on examination.
PLR-103181-16 2

                                             FACTS

Taxpayer, a wholly owned subsidiary of Company, is a domestic corporation that was
formed to serve as an interest charge domestic international sales corporation (“IC-
DISC”) and that has a commission agreement with Company.

On Date 1, a meeting between Company and Accounting Firm was held to discuss the
formation of a subsidiary corporation which would file an election to be treated as an IC-
DISC. On Date 2, the entity was formed and Accounting Firm communicated to
Taxpayer and Company that it would prepare Form 4876-A to make the IC-DISC
election. Due to oversight of Accounting Firm, the Form 4876-A was not prepared and
timely filed.

On or around Date 3, Taxpayer filed its tax return for the tax year ended Date 4 on Form
1120-IC-DISC. On Date 5, Taxpayer and Accounting Firm became aware that Form
4876-A had not been filed when the Service returned the Form 1120-IC-DISC indicating
that it did not have a record of a Form 4876-A having been filed. Accounting Firm then
advised Taxpayer that the best course of action to remedy the situation was to seek a
private letter ruling.

Taxpayer represents that the extension does not prejudice the Government’s interests
and that Taxpayer is not placed in a better position by making the election at this time
than it would have been in had the election been timely made.

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

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

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-103181-16 3

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.

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 Form 4876-A and 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
PLR-103181-16 4

herein, this letter does not express or imply any opinion 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,


                               _____________________________________
                               Robert Z. Kelley
                               Assistant to the Branch Chief, Branch 6
                               Office of Associate Chief Counsel (International)

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

cc: