Corporation received 60 more days to elect IC-DISC status

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation. Its accounting firm prepared Form 4876-A, an officer signed it, and another officer was asked to file it, but sudden employee departures and unsuccessful replacements disrupted the filing. The corporation timely filed its first Form 1120-IC-DISC and then learned from the IRS that the election form had never been filed. The IRS concluded that the standards for discretionary relief were met and granted 60 days to file Form 4876-A, without determining whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation receive more time to file Form 4876-A and 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(b); 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: 201645003                                              Third Party Communication: None
Release Date: 11/4/2016                                        Date of Communication: Not Applicable
Index Number: 9100.22-00, 992.02-00
                                                               Person To Contact:
-----------------------------------------------                -----------------------------, ID No. -------------
---------------------------------------                        -----------------
------------------------------------------                     Telephone Number:
--------------------------                                     ----------------------
                                                               Refer Reply To:
In re: ----------------------------------------------------- CC:INTL:B06
------------------------------------------------------       PLR-104108-16
                                                               Date:
                                                               August 1, 2016




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

                                                    LEGEND

Taxpayer =                 -----------------------------------------------------------------------
Company =                  -----------------------------
Accounting Firm =          --------------
Individual 1 =             --------------------------
Individual 2 =             ------------------ ---------
Date =                     --------------------------

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

This responds to a letter dated January 21, 2016 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
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. They are
subject to verification on examination.

                                                     FACTS

Taxpayer is a domestic corporation owned entirely by Company. Taxpayer was formed
on Date for the purpose of qualifying and operating as an interest charge domestic
international sales corporation (“IC-DISC”). After formation, Accounting Firm prepared

PLR-104108-16                                         2

Form 4876-A, and forwarded the document to Individual 1, an officer of Company, who
signed the document and asked Individual 2, another officer of Company, to file the
election. At that time, Individual 2 suddenly terminated employment with Company. A
replacement for Individual 2 was hired, but was employed by Company for less than
one month. A second replacement was not adequately able to perform the duties of the
job, and was replaced as soon as Company could hire a permanent replacement.

Taxpayer timely filed Form 1120-IC-DISC for Taxpayer’s first taxable year. After doing
so, Taxpayer received correspondence from the Service that Taxpayer was ineligible to
file Form 1120-IC-DISC because Taxpayer had not filed Form 4876-A.

As a result, Taxpayer has requested a ruling that grants an extension of time of 60 days
from the date of the ruling letter to file Form 4876-A and that such filing will be treated
as a timely election to be treated as an IC-DISC for Taxpayer’s first taxable year.

                                        LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code (“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.

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-104108-16                                 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
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
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.

PLR-104108-16                                    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,

                                    _____________________________________
                                    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