Corporation received 60 days to file late IC-DISC election

Plain-English summary

A corporation was formed to act as an interest charge domestic international sales corporation for a related company’s export sales. Its law firm prepared Form 4876-A, but responsibility for filing the election remained unsettled among the corporation, law firm, and accounting firm, and the form was never submitted. The corporation nevertheless operated and filed its first return as an IC-DISC until the IRS notified it that no election was on record. Finding that the regulatory-election relief standards were satisfied, the IRS granted 60 days to file Form 4876-A with retroactive effect for the first taxable year. The ruling did not determine whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: Could the corporation file its IC-DISC election after the first-year 90-day deadline?
• Outcome: approved; a 60-day extension was granted
• Key authorities: IRC § 992(b)(1)(A); 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: 201918014                                   Third Party Communication: None
Release Date: 5/3/2019                              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-125713-18
                                                    Date:
                                                    December 24, 2018

                  TY:------

Legend
Taxpayer = -----------------------
Company = ---------------------------------------
Individual = ----------------
Law Firm = --------------------------------------
Accountant = ------------------
Accounting Firm = --------------
Date 1 = --------------------
Date 2 = -------------------
Year 1 = ------
Year 2 = ------

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

This responds to a letter dated August 22, 2018, supplemented by a letter dated
November 5, 2018, 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 penalty of perjury
statements executed by appropriate parties. This office has not verified any of the
material submitted in support of the request for rulings. Verification of the information,
representations, and other data may be required as part of the audit process.
PLR-125713-18                                         2

                                                 FACTS

Taxpayer was formed to serve as an interest charge domestic international sales
corporation (“IC-DISC”) acting as a commission agent with respect to Company’s sales
of export property. In late Year 1 and early Year 2, Individual, an officer of Company,
met with Accountant from Accounting Firm to discuss the tax benefits of and process for
forming an IC-DISC. Company engaged Law Firm to incorporate Taxpayer and Law
Firm caused Taxpayer to be incorporated in Date 1. The responsibility for filing Form
4876-A was unsettled by the Taxpayer, Accounting Firm, and Law Firm.

Believing all the requirements to conduct business and to be treated as an IC-DISC for
its first taxable year were satisfied, Taxpayer began acting as an IC-DISC as of its date
of formation. Accountant, also believing all the requirements for Taxpayer to be treated
as an IC-DISC were satisfied, timely filed Taxpayer's Form 1120-IC-DISC (“Interest
Charge Domestic International Sales Corporation Return”) for the calendar year Year 2.
On or about Date 2, Taxpayer received a letter from the Service indicating that the
Service has no record of Taxpayer's filing Form 4876-A. Based on a review of the files
of both Law Firm and Accounting Firm, Taxpayer confirmed that the previously prepared
Form 4876-A had not been filed with the Service. By that time, the deadline for filing a
Form 4876-A effective for Taxpayer's first taxable year had passed.

Taxpayer has requested a ruling that grants an extension of time of 60 days from the
date of the ruling letter to file Form 4876-A and that such filing will be treated as a timely
election to be treated as an IC-DISC for Taxpayer's first taxable year beginning Date 1.

                                        LAW AND ANALYSIS

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

Temp. Treas. Reg. § 1.921-1T(b)(1) provides, in part, that a corporation electing IC-
DISC status must file Form 4876-A.

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.

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


1
    As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-125713-18                                  3

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.

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 as required by Temp. Treas. Reg. § 1.921-1T(b)(1).

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 of time to make the election
is not a determination that Taxpayer is otherwise eligible to make the election or to
claim DISC status or benefits.

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). A copy of this letter ruling should be filed with the Form
4876-A.

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 ruling neither expresses nor implies any opinion concerning the tax
consequences of any aspect of any transaction or item discussed or referenced in this
letter.
PLR-125713-18                                  4

Pursuant to a Power of Attorney on file with this office, a copy of this letter is being
furnished to your authorized representatives.


                                       Sincerely,


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

Enclosures (2)