IRS grants 60 days to file an IC-DISC election not found in its records

Plain-English summary

A domestic corporation was formed to operate as an interest charge domestic international sales corporation for a partnership that manufactured and sold products. Its accounting firm prepared Form 4876-A, and the corporation's chief financial officer stated that he signed and mailed it within the first-year deadline, but he could not identify the mailing date. The corporation operated as though the election were valid and filed several IC-DISC returns before the IRS said it had no valid election on file. The IRS found that the corporation met the regulatory standard for reasonable, good-faith relief and granted 60 days to file Form 4876-A, which would be treated as timely for its first taxable year. The ruling did not decide whether the corporation otherwise qualified for IC-DISC status or benefits.

Ruling snapshot

• Question: May the corporation receive additional time to file its first-year Form 4876-A election when the IRS has no valid election on file?
• Outcome: approved (a 60-day extension was granted)
• 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: 202021017                                              Third Party Communication: None
Release Date: 5/22/2020                                        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:6
                                                               PLR-125250-19
                                                               Date:
                                                               February 20, 2020



                                                    LEGEND

Taxpayer                   =        -----------------------------------------
Partnership                =        --------------------------------------------
Company                    =        --------------------------------------------------
Accounting Firm            =        ------------
Individual 1               =        -------------------
Individual 2               =        ------------------
Individual 3               =        ------------------------
Individual 4               =        ------------------
Individual 5               =        --------------------------
Individual 6               =        ----------------------
Products                   =         --------------------------------------------------------------------------------
-
------------------------------------------------------------------------------------------
Date 1                     =        -----------------------
Date 2                     =        -----------------------
Taxable Year 1             =        -------
Taxable Year 2             =        -------
Taxable Year 3             =        -------
Taxable Year 4             =        -------
Taxable Year 5             =        -------


Dear Mr. ---------:

This responds to correspondence dated October 18, 2019, 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.
PLR-125250-19                                        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

Taxpayer is a domestic corporation with a taxable year beginning on Date 2. Taxpayer
was formed on Date 1 to operate as an interest charge domestic international sales
corporation (“IC-DISC”) and has established a commission arrangement with
Partnership. Partnership is a limited liability company taxed as a partnership for Federal
income tax purposes and owned by Individual 1, Individual 2, Individual 3, Individual 4,
Individual 5, and Company. Partnership manufactures and sells Products. Company is
a domestic corporation owned by Individual 1, Individual 3, Individual 4, and
Individual 5.1

Taxpayer was formed as a result of advice from Accounting Firm. Accounting Firm
prepared Form 4876-A with an effective date of Date 2 and provided it to Taxpayer.
Taxpayer’s chief financial officer, Individual 6, stated in an affidavit that he executed and
mailed the Form 4876-A to the IRS within 90 days after Date 2 but did not specify a
date. Upon its formation, Taxpayer immediately began operating as if it had a valid
DISC election in effect. Accounting Firm helped Taxpayer prepare and timely file Forms
1120-IC-DISC (“Interest Charge Domestic International sales Corporation Return”) for
Taxable Year 1 through Taxable Year 2 as well as Taxable Year 3, and late file Forms
1120-IC-DISC for Taxable Year 4 through Taxable Year 5. Upon receiving the late-filed
returns, the IRS sent notices to Taxpayer stating that the IRS had not received a valid
Form 4876-A with respect to Taxpayer.

Accounting Firm submitted this request for relief on behalf of Taxpayer under Treas.
Reg. §§ 301.9100-1 301.9100-3 for an extension of time to file Form 4876-A for Taxable
Year 1, Taxpayer’s first taxable year.

                                       LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code 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 We express no opinion in this ruling letter regarding whether the ownership structures of Taxpayer,

Partnership, and Company constitute a gift or gifts between or among the individual shareholders.
2 As used in this letter, the terms “IC-DISC” and “DISC” have the same meaning.
PLR-125250-19                                 3

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.

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 Taxable 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
PLR-125250-19                                  4

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 representative.


                                       Sincerely,



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

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


cc: