Grants extra time for an IC-DISC election

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation for its parent. Its accounting firm prepared Form 4876-A on time, but the only staff accountant in the corporate accounting department was on maternity leave and did not receive the form until after the filing deadline. The corporation filed late, and the IRS initially notified it that the election was ineffective. The IRS later found that the corporation met the good-faith and government-prejudice standard for discretionary relief. It granted 60 days to file Form 4876-A, which would be treated as a timely IC-DISC election for the corporation's first tax year, without deciding whether it otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation receive extra time to file Form 4876-A for its first-year IC-DISC election?
• Outcome: Approved.
• 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: 201812006
Release Date: 3/23/2018
Third Party Communication: None
Date of Communication: Not Applicable
Index Number: 9100.20-00, 992.02-00

Person To Contact:
[redacted], ID No. [redacted]
Telephone Number:
[redacted]
Refer Reply To:
CC:INTL:B06
PLR-127588-17
Date:
December 20, 2017

In Re: [redacted]

Taxpayer = [redacted]
Accounting Firm = [redacted]
Parent = [redacted]
Date 1 = [redacted]
Date 2 = [redacted]
Date 3 = [redacted]
Date 4 = [redacted]
Year 1 = [redacted]

Dear [redacted]:

This responds to a letter dated August 8, 2017, 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 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.

FACTS

Taxpayer is a domestic corporation wholly owned by Parent. Taxpayer was formed on
Date 1 to operate as an interest charge domestic international sales corporation (“IC-
DISC”), assisting its related supplier, Parent, with sales of export property.

In Year 1, Accounting Firm prepared Form 4876-A and provided it to Taxpayer on Date

2. Taxpayer forwarded the form to a staff accountant, who works in its corporate
   accounting department. The corporate accounting department employs only one staff

PLR-127588-17 2

accountant. That staff accountant was out of the office on maternity leave and did not
receive the form until after the filing deadline. As such, Taxpayer did not timely file
Form 4876-A.

Taxpayer filed its Form 4876-A on Date 3. In correspondence dated Date 4, the Service
notified Taxpayer that it was ineligible to elect IC-DISC status since the form was
received late.

After receiving notification that the Form 4876-A had not been timely 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 (“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.

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.

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

PLR-127588-17 3

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
in fact 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.

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

Sincerely,

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

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