A corporation received more time to file its IC-DISC election after an adviser mix-up

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation, or IC-DISC. Its accounting firm believed the law firm had filed Form 4876-A, while the law firm believed the accounting firm had filed it. The corporation learned of the omission after the IRS returned its IC-DISC tax return because no approved election was on record. The IRS concluded that the corporation met the requirements for discretionary late-election relief and granted 60 days from the ruling date to file Form 4876-A. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation receive an extension to file Form 4876-A for its first taxable year?
• 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: 201746018                                              Third Party Communication: None
Release Date: 11/17/2017                                       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
In Re: ----------------------------                            PLR-106781-17
                                                               Date:
                                                               August 23, 2017


                                                    LEGEND

Taxpayer=                  ----------------------------
Accounting Firm=           -------------
Law Firm=                  --------------------
Corporation=               ---------------------------------
Individual=                ---------------
Date 1=                    --------------------------
Date 2=                    --------------------------
Date 3=                    ---------------------
Date 4=                    --------------------------
Date 5=                    --------------------------


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

This responds to a letter dated January 16, 2017, supplemented by a letter dated
August 8, 2017, 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 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 and was formed on Date 1 for the sole purpose of
qualifying and operating as an interest charge domestic international sales corporation
PLR-106781-17                                         2

(“IC-DISC”). Taxpayer operates under a commission arrangement with Corporation.
Taxpayer is wholly-owned by Corporation. Individual is a shareholder and the general
manager of Corporation.

On Date 2, Accounting Firm advised Individual of the benefits associated with operating
an IC-DISC. After deciding to form Taxpayer as an IC-DISC, Individual retained Law
Firm to organize Taxpayer as an IC-DISC and prepare the required incorporation
documents. 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.

Due to a miscommunication, Accounting Firm believed Law Firm filed Form 4876-A on
Taxpayer’s behalf. However, Law Firm believed that Accounting Firm filed Form 4876-
A on behalf of Taxpayer. As a result, a Form 4876-A for Taxpayer was not filed.

Believing all the requirements to conduct business and be treated as an IC-DISC for its
first taxable year were satisfied, Taxpayer began operating as an IC-DISC on Date 3.
Taxpayer represents that it did not realize this error until after Taxpayer filed a Form
1120-IC-DISC tax return for the year ending Date 4, and the Service subsequently
returned on Date 5 the Form 1120-IC-DISC with a transmittal letter stating that there
was no record of an approved Form 4876-A for Taxpayer.

Upon discovery that the form had not been timely filed, Taxpayer requested that
Accounting Firm submit a ruling request granting Taxpayer 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.

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


1
    As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-106781-17                                 3

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 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). Taxpayer should attach a copy of this ruling letter to its
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-106781-17                                    4


Pursuant to a Power of Attorney on file in this office, copies of this ruling letter are being
furnished to your authorized representative.

                                    Sincerely,


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

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