Late IC-DISC election receives 60-day extension

Plain-English summary

A domestic corporation intended to elect interest charge domestic international sales corporation status from its formation. Its accounting firm prepared Form 4876-A, but a misunderstanding resulted in the corporation never filing it. The IRS found that the corporation met the standards for discretionary regulatory-election relief and granted 60 days to file the form, with the filing treated as timely for its first tax year. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation receive additional time to file Form 4876-A for its first taxable year?
• Outcome: approved
• Key authorities: IRC § 992(b)(1); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201652018 Third Party Communication: None
Release Date: 12/23/2016 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-141288-15
Date:
September 26, 2016

                                                           TY: -------

Legend

Taxpayer = ----------------------------------------------------------
Accounting Firm = -------------------------
Parent = -------------------------------------------
Member 1 = -----------------------
Member 2 = -------------------------
Member 3 = --------------------------------
Cooperative = ------------------------------------------------------------
Patron 1 = --------------------------------
Date 1 = --------------------------
Date 2 = ----------------------------
Date 3 = ---------------------------

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

This responds to a letter dated December 10, 2015, as supplemented by a letter dated
June 20, 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 penalties of perjury
statements executed by the 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.
PLR-141288-15 2

                                             FACTS

Taxpayer is a domestic corporation owned by Parent. Taxpayer was incorporated on
Date 1 and was intended to be treated as an interest charge domestic international
sales corporation (“IC-DISC”) from inception. Parent is a domestic limited liability
company that was owned by Member 1, Member 2, and Member 3 as of Date 1.
Taxpayer sells through Cooperative, which pays commissions to Taxpayer.
Cooperative is an agricultural cooperative that is subject to the provisions of
subchapter T of the Internal Revenue Code (“Code”). Cooperative was owned by
Patron 1, Member 2, and Member 3 as of Date 1. Patron 1 is 100% owned by Member
1 and Member 1’s affiliated corporation.

Parent relied on Accounting Firm to arrange for Taxpayer to qualify as an IC-DISC,
including, but not limited to, the preparation and filing of Form 4876-A. Due to an
apparent misunderstanding, while Accounting Firm prepared the Form 4876-A and sent
it to Taxpayer, Taxpayer never filed the Form 4876-A.

On or before Date 2, Taxpayer’s Form 1120-IC-DISC (“Interest Charge Domestic
International Sales Corporation Return”) was filed for its first taxable year ended Date 3.
Taxpayer later received correspondence from the Service stating that it was unable to
process the Form 1120-IC-DISC because Taxpayer did not have a Form 4876-A on file
with the Service.

Accounting Firm submitted this request for relief on behalf of Taxpayer under Treas.
Reg. § 301.9100-3 for an extension of time to file Form 4876-A effective Date 1.

                                    LAW AND ANALYSIS

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

Temp. Treas. Reg. § 1.921-1T(b)(1) provides, in relevant 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-141288-15 3

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.

Treas. Reg. § 301.9100-3(a) provides that requests for extension 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
in fact eligible to make the election or to claim IC-DISC status or benefits. See Treas.
Reg. § 301.9100-1(a). For example, we have not attempted to determine whether
Cooperative would have sufficient combined taxable income (within the meaning of
section 994(a)(2) and (b)(2) and the regulations thereunder) with respect to which
commissions properly payable to Taxpayer could be calculated, given the rules
described in section 1382(b) (a cooperative’s taxable income does not take into account
amounts paid that are patronage dividends or per-unit retains) and (c) (when
determining taxable income, there is an allowable deduction for non-patronage
distributions). 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.
PLR-141288-15 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, 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, copies of this letter are
being sent to your authorized representatives.

                               Sincerely,


                               _____________________________________
                               Christopher J. Bello
                               Branch Chief
                               Office of Associate Chief Counsel (International)
                               Branch 6

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

cc: