Exporter's corporation gets extra time to file its lost IC-DISC election form

Plain-English summary

A domestic corporation was set up to act as an interest-charge domestic
international sales corporation (IC-DISC), a special export-incentive entity
that earns commissions on a related company's foreign sales and lets the
owners defer or reduce tax on export income. To get IC-DISC status the
corporation must file Form 4876-A within 90 days of the start of its first
year. The company's accountants prepared and mailed the form, but the IRS
never received it, and the problem surfaced only when the IRS rejected the
company's first IC-DISC return for lack of an approved election on file. The
company asked for relief under Treasury Regulation § 301.9100-3, and the IRS
granted a 60-day extension to file Form 4876-A, treating that filing as a
timely election for the first year. The IRS was careful to say it was only
fixing the timing, not deciding whether the company actually qualifies as an
IC-DISC. Exporters using this structure care because the tax benefits vanish
if the election is not validly on file.

Ruling snapshot

• Question: Can a corporation get more time to file the IC-DISC election (Form 4876-A) the IRS never received?
• Outcome: Approved (60-day extension under § 301.9100-3; qualification not decided)
• Key authorities: IRC § 992(b); Treas. Reg. §§ 1.921-1T(b)(1), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201917005 Third Party Communication: None
Release Date: 4/26/2019 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-121681-18
Date:
December 20, 2018

              TY:-------

Legend

Taxpayer = ----------
Shareholder = ----------
Accounting Firm = ----------
Date 1 = ----------
Date 2 = ----------
Year 1= -------

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

This responds to correspondence dated May 31, 2018 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. Additional information was submitted in
a letter dated December 3, 2018.

The ruling contained in this letter is 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 a ruling. It is subject
to verification on examination.

                                            FACTS

Taxpayer is a domestic corporation wholly owned by Shareholder. Taxpayer was
formed on Date 1 to operate as an interest charge domestic international sales
corporation ("IC-DISC"). Taxpayer was formed to sell export property of Shareholder
internationally on a commission basis.

Shareholder consulted Accounting Firm for advice and assistance with arranging for
Taxpayer to qualify as an IC-DISC, including preparation of Form 4876-A. Accounting
Firm prepared Form 4876-A and Taxpayer avers that Form 4876-A was executed and
mailed to the Service on or around Date 2. It is unclear why the Service did not receive
the mailing.

Accounting Firm prepared and Taxpayer timely filed its Form 1120-IC-DISC ("Interest
Charge Domestic International Sales Corporation Return") for Year 1. Taxpayer was
subsequently notified by the Service that the Year 1 IC-DISC return was not eligible for
filing because of the lack of an approved Form 4876-A on file for Taxpayer. Since its
incorporation, Taxpayer has conducted business and complied with all relevant rules
and procedures consistent with its understanding that it was an IC-DISC.

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 for Year 1, Taxpayer's
first taxable year.

                                   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 the election shall be made in the manner prescribed
by the Secretary and shall be valid only if all persons who are shareholders in such
corporation on the first day of the first taxable year for which such election is effective
consent to the election.

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
Unless specified otherwise, all section references are references to the Internal Revenue Code of 1986,
as amended.
2
As used in this letter, the terms "IC-DISC" and "DISC" have the same meaning.

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.

The IC-DISC election described in 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, Year 1.

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 ruling
letter applies.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) 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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

                                   Sincerely,


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

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

cc: