An adviser miscommunication qualified for late IC-DISC election relief

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation, or IC-DISC. It relied on a law firm to complete the necessary elections, but the firm believed an accounting firm was responsible for filing Form 4876-A. The form was therefore not filed within the required 90-day period. The corporation represented that late relief would not prejudice the government or place it in a better position than a timely election. The IRS granted 60 days from the ruling date to file the form, without deciding whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation file Form 4876-A late after its advisers misunderstood who would file it?
• Outcome: Approved, with 60 days from the ruling date to file.
• 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: 201744010                                              Third Party Communication: None
Release Date: 11/3/2017                                        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-105227-17
                                                               Date:
                                                               August 08, 2017




                                                               -------------
Legend

Taxpayer =                          ---------------------------------------------
Company =                           ---------------------------
Law Firm =                          ------------------------------
Accounting Firm =                   ----------------------
Date 1 =                            ------------------------
Date 2 =                            ----------------------------
Year 1 =                            -------
Individual A =                      ---------------------------------------
Individual B =                      ------------------------
Shareholder A =                     --------------------------------------------
Shareholder B =                     ------------------------------
Shareholder C =                     ----------------------------------
Shareholder D =                     -------------------------------


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

This responds to a letter dated January 16, 2017, supplemented by a letter dated
August 7, 2017, 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
PLR-105227-17                                         2

submitted in support of the request for a ruling. It is subject to verification on
examination.
                                          FACTS

On Date 1, Taxpayer was formed to serve as an interest charge domestic international
sales corporation (“IC-DISC”). Taxpayer is a domestic corporation that is wholly owned
by Individual A, Individual B, and Shareholders A, B, C, and D. Company is a domestic
corporation that is wholly owned by Individual A, Individual B, and Shareholders A, B, C,
and D. The ownership shares held by each owner of Taxpayer are proportional to those
owners’ shares of Company.

Taxpayer relied on Law Firm to timely make the necessary elections to qualify Taxpayer
as an IC-DISC for Year 1. Due to a miscommunication between Law Firm and
Taxpayer, Law Firm believed Accounting Firm was responsible for filing the Form 4876-
A. The Form 4876-A was not filed within 90 days after Date 1.

After Taxpayer discovered on Date 2 that Form 4876-A had not been timely filed,
Taxpayer engaged Accounting Firm to seek a private letter ruling granting an extension
of time to file Form 4876-A for Year 1.

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.

                                        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.

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.

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-105227-17                                 3

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
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.
PLR-105227-17                                   4

In accordance with the Power of Attorney on file with this office, copies of this ruling
letter are being sent 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