Export corporation receives more time for IC-DISC election

Plain-English summary

A domestic corporation was formed solely to operate as an interest charge domestic international sales corporation, or IC-DISC. Its managers hired an accounting firm and a law firm to handle the required formation documents and filings. The accounting firm prepared Form 4876-A, but the managers mistakenly believed the firm had filed it and did not discover the omission until the IRS sent a notice. The IRS found that the corporation met the regulatory-relief standard and granted 60 days to file the form for its first taxable year. The letter did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation file its late Form 4876-A election to be treated as an IC-DISC?
• Outcome: Approved, with 60 days to file the election, without deciding the corporation's underlying eligibility.
• 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: 201641007 Third Party Communication: None
Release Date: 10/7/2016 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-109167-16
Date:
July 07, 2016

In Re: -----------------------

                                                LEGEND

Taxpayer= -----------------------
Law Firm= ----------------------
Accounting Firm= -------------------
Company= -------------------------------------------------------
CEO= --------------------
CFO= ---------------------
Treasurer= --------------------------
Year 1= -------
Date 1= -----------------------
Date 2= --------------------------
Date 3= ------------------------
Date 4= ---------------------
Date 5= ---------------------------

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

This responds to a letter dated March 7, 2016, supplemented by a letter dated June 10,
2016, submitted by Accounting Firm 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 Accounting Firm, and accompanied by affidavits and
PLR-109167-16 2

penalty 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

Taxpayer is a domestic corporation that assists Company with the export of property.
Taxpayer is wholly-owned by Company. Several shareholders own Company.
Taxpayer’s management, consisting of its President and CEO, CFO, and Treasurer,
also serves as Company’s management.

In Year 1, Accounting Firm advised Company’s management of the benefits associated
with operating an interest charge domestic international sales corporation (“IC-DISC”).
Company’s management was not experienced in international tax matters or familiar
with IC-DISC matters. After deciding to form Taxpayer as an IC-DISC, Company’s
management engaged Law Firm to form Taxpayer and engaged Accounting Firm to
ensure all appropriate documents were identified, prepared, and executed as required
by law. Taxpayer relied on Accounting Firm and Law Firm to organize and to prepare
all documents and filings needed to establish Taxpayer as an IC-DISC. As a result,
Taxpayer was incorporated on Date 1 with the sole purpose of qualifying and operating
as an IC-DISC. Taxpayer began operating as an IC-DISC on Date 1.

Law Firm forwarded the formation documents to the CEO, CFO, and Treasurer on Date

2. Law Firm expected that any further necessary steps would be advised by Accounting
   Firm. Accordingly, Accounting Firm prepared Form 4876-A and delivered it to the
   Treasurer of Taxpayer on Date 3. Taxpayer’s management mistakenly believed that
   Accounting Firm had filed Form 4876-A on Taxpayer’s behalf and that Accounting
   Firm’s correspondence received by Treasurer on Date 3 was a confirmation of that
   filing. However, Accounting Firm had not filed Form 4876-A and did not file it. Further,
   Taxpayer’s management believed that all requirements for Taxpayer to operate as an
   IC-DISC were satisfied. On Date 4, Taxpayer filed its Form 1120-IC-DISC for Year 1.
   Taxpayer received a notice from the Service informing Taxpayer that it had failed to
   timely file Form 4876-A on Date 5. Until then, Taxpayer had not received any notice
   and was not otherwise aware that a Form 4876-A had not been filed.

After discovering that a Form 4876-A had not been filed, 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

1
As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-109167-16 3

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
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.

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). A copy of this letter ruling should be filed with Taxpayer’s
Form 4876-A.
PLR-109167-16 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.

Pursuant to a Power of Attorney on file in this office, a copy of this letter is being
furnished to your authorized representatives.

                                Sincerely,


                                _____________________________________
                                Joseph Dewald
                                Senior Technical Reviewer, Branch 6
                                Office of Associate Chief Counsel (International)

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