Corporation receives 60 days to file a late IC-DISC election

Plain-English summary

A domestic corporation intended to elect interest charge domestic international sales corporation status from its formation. Its accounting firm prepared Form 4876-A, gave filing instructions, and later reminded the corporation to file, but the corporation misunderstood who was responsible and missed the deadline. After discovering the omission, the corporation promptly asked for discretionary relief under Treasury Regulation sections 301.9100-1 and 301.9100-3. The IRS found that the corporation acted reasonably and in good faith and that relief would not prejudice the government. It granted 60 days from the ruling date to file Form 4876-A, which would then be treated as a timely IC-DISC election for the corporation's first taxable year. The ruling did not decide whether the corporation 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 taxable year?
• Outcome: Approved. The corporation received 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 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201922025                                             Third Party Communication: None
Release Date: 5/31/2019                                       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-127270-18
                                                              Date:
                                                              March 05, 2019




Legend

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

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

This responds to a letter dated July 10, 2018, submitted on behalf of Taxpayer,
requesting that the Internal Revenue Service (“IRS”) 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 (“DISC election”) 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. While this office has not verified any of the
material submitted in support of the request for rulings, it is subject to verification on
examination.

                                                      Facts

Taxpayer is a domestic corporation wholly owned by Opco. Opco is a domestic “C”
corporation. Taxpayer operates under a commission arrangement with Opco.
Accounting Firm was engaged to perform consulting and compliance work for Opco
and, as part of that engagement, advised Opco of benefits an interest charge domestic
international sales corporation (“IC-DISC”) may provide.
PLR-127270-18                                         2


Taxpayer was incorporated on Date 1, early in Year, and was intended to be treated as
an IC-DISC from inception. On or about Date 1, Taxpayer entered into a “Commission /
Sales Agreement” with Opco that is framed by reference to the domestic international
sales corporation (“DISC”)1 provisions of the Internal Revenue Code, and Taxpayer’s
board of directors adopted an initial resolution for Taxpayer to timely elect DISC status.
Taxpayer proceeded to operate as a DISC.

Following its incorporation, Accounting Firm prepared a Form 4876-A for Taxpayer and
provided the form to Taxpayer with instructions to execute and file it no later than Date

2. Accounting Firm subsequently reminded Taxpayer to file the election.

Later in Year, Accounting Firm followed up with Taxpayer for a copy of the executed
Form 4876-A, and it was discovered that Taxpayer failed to file Form 4876-A. Taxpayer
apparently misunderstood who was responsible for filing Form 4876-A. Taxpayer and
Opco do not have employees with specific tax expertise. Both primarily rely on their
outside advisors for all tax matters. Neither often handles matters similar to DISC
elections.

Accounting Firm then advised Taxpayer that Taxpayer could apply for an extension of
time to make the election under Treas. Reg. §§ 301.9100-1 and 301.9100-3. Taxpayer
immediately chose to pursue this extension, and had Accounting Firm prepare the
request letter.

                                           Law and Analysis

Section 992(b)(1)(A) provides that an election by a corporation to be treated as a DISC
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
    As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-127270-18                                  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.

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)

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.

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.
PLR-127270-18                                 4

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date and control number of the
letter ruling.


                                       Sincerely,



                                       Angela E. Holland
                                       Senior Counsel, Branch 6
                                       Office of Associate Chief Counsel
                                       (International)