Corporation received 60 days to make a late IC-DISC election

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation and sell its parent's products to foreign buyers on a commission basis. Its accounting firm and a company officer each believed the other would file Form 4876-A, so neither submitted the form within the first-year 90-day deadline. The IRS found that the corporation met the regulatory-extension standard and gave it 60 days to file the election. The late filing would be treated as timely for the corporation's first tax year, but the ruling did not decide whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation file a late Form 4876-A election for IC-DISC status in its first taxable year?
• Outcome: approved, with 60 days to file Form 4876-A
• 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: 201937002                                              Third Party Communication: None
Release Date: 9/13/2019                                        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-102024-19
------------------------------------------------------------   Date:
----------------                                               June 12, 2019




                                                               -------------
Legend

Taxpayer =                          ---------------------------------------------------------------------------------
Accounting Firm =                   -----------------------------------
Company =                           ---------------------------------------
Date 1 =                            -----------------------
Date 2 =                            -----------------------
Date 3 =                            ------------------------
Date 4 =                            ------------------------
Date 5 =                            ---------------------------
Year 1 =                            -------
Trust A =                           -------------------------------------------------
Trust B =                           ----------------------------------------------------
Individual A =                      ------------------------
Individual B =                      --------------------------
Individual C =                      ---------------------------


Dear --------------------

This responds to a letter dated December 17, 2018, supplemented by additional
correspondence dated June 08, 2019, submitted by your representatives 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 Year 1, Taxpayer’s first taxable year.
PLR-102024-19                                             2

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

                                                     FACTS

On Date 1, Taxpayer was formed to serve as an interest charge domestic international
sales corporation (“IC-DISC”). Taxpayer is a domestic corporation that is wholly owned
by Company. Company is an S corporation owned by Trust A and Trust B, until Date 2,
when Trust A transferred its Company shares to Individual A.1 Taxpayer was formed in
order to sell Company’s products to international buyers on a commission basis.

In Year 1, Taxpayer engaged Accounting Firm for assistance with arranging for
Taxpayer to qualify as an IC-DISC. Accounting Firm prepared a Form 4876-A and sent
it via electronic mail to Individual C, an officer of Company, with the belief that Taxpayer
would ensure timely filing with the Service. Individual B, in her official capacities as
Taxpayer’s President and as Company’s President, signed the prepared Form 4876-A
on Date 3. Individual C sent an electronic copy to Accounting Firm on Date 4, with the
belief that Accounting Firm would ensure timely filing with the Service. Due to these
differing beliefs as to who was responsible, and a lack of communication, the completed
Form 4876-A was not submitted to the Service in a timely fashion by either Taxpayer or
Accounting Firm. As a result, the Form 4876-A was not filed within 90 days after
Date 1.

Accounting Firm was instructed to file Taxpayer’s Year 1 tax return for the short taxable
year starting Date 1, and ending Date 5. Accounting Firm, assuming that Form 4876-A
had been timely filed, filed Form 1120 IC-DISC for Year 1 with the Service. Taxpayer
subsequently learned that the Service had no record of the filing of a Form 4876-A
through receipt of a Form 6800sc. Upon learning of the miscommunications that left the
Form 4876-A unfiled, Taxpayer instructed Accounting Firm to file a request for a ruling
granting an extension of time to file Form 4876-A for Year 1, its first taxable year.

                                           LAW AND ANALYSIS

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

1
    The beneficiary of Trust A is Individual A, and the beneficiary of Trust B is Individual B.
2
    As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-102024-19                                 3

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.

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
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.

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. 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
PLR-102024-19                                   4

Form 4876-A and 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.

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

                                   Sincerely,


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

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


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