90-day extension to file a late IC-DISC election after the IRS had no record of the original

Plain-English summary

An interest-charge domestic international sales corporation (IC-DISC) is a special
entity that can give U.S. exporters a tax benefit, but a company has to elect that
status by filing Form 4876-A within 90 days of the start of its first year. Here,
a company hired a consultant to set it up as an IC-DISC, and its officer signed and
mailed the election, but kept no proof of mailing. Years later, while filing its
IC-DISC returns, the company learned the IRS had no record of the election ever
being received, and attempts to confirm it during COVID-19 staffing shortages went
nowhere. The company asked the IRS for extra time under the Section 301.9100-3
relief rules. Normally relief is denied once the relevant years are closed by the
statute of limitations, but the company supplied an independent auditor's
statement certifying the government would not be prejudiced. The IRS granted a
90-day extension to refile Form 4876-A, treated as a timely election for the first
year. The IRS cautioned this is not a ruling that the company actually qualifies
for IC-DISC status.

Ruling snapshot

• Question: Should the IRS grant more time to file a late IC-DISC election (Form 4876-A) where the IRS had no record of the original filing?
• Outcome: Approved (90-day extension granted under Treas. Reg. § 301.9100-3, supported by an independent-auditor statement)
• Key authorities: IRC § 992(b); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1 through 301.9100-3; IRC § 996(g)

Full text (IRS public release)

Internal Revenue Service                          Department of the Treasury
                                                  Washington, DC 20224

Number: 202427006                                 Third Party Communication: None
Release Date: 7/5/2024                             Date of Communication: Not Applicable
Index Number: 9100.00-00, 992.02-00
                                                  Person To Contact:
[Taxpayer name and address redacted]                --------------, ID No. --------
                                                  Telephone Number:
                                                    --------------
                                                  Refer Reply To:
                                                    CC:INTL:B06
In Re: [redacted]                                 PLR-124114-23
                                                  Date:
                                                  April 10, 2024

Legend

Taxpayer            = --------------
Tax Consultant      = --------------
Individual          = --------------
Shareholder         = --------------
Independent Auditor = --------------
Date 1              = --------------
Date 2              = --------------
Date 3              = --------------
Date 4              = --------------
Date 5              = --------------
Year 1              = --------------
Year 2              = --------------
Year 3              = --------------
Year 4              = --------------
Year 5              = --------------
Year 6              = --------------
Year 7              = --------------
Year 8              = --------------

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

This responds to correspondences dated December 6, 2023, and March 12, 2024,
submitted by Tax Consultant 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.

                                         FACTS

On Date 1, Taxpayer was formed as a domestic corporation with a calendar taxable
year. Shareholder is Taxpayer's only shareholder. Individual is the Chief Financial
Officer of Taxpayer and the President and Chief Executive Officer of Shareholder.

In Year 1, Taxpayer engaged Tax Consultant to set up Taxpayer as an interest charge
domestic international sales corporation ("IC-DISC"). Taxpayer relied on Tax Consultant
to organize and prepare all documents and filings needed to establish Taxpayer as an
IC-DISC. Tax Consultant completed Form 4876-A and delivered it, along with mailing
instructions, to Individual.

Taxpayer represents that Individual signed and mailed Form 4876-A to the Service on
Date 2, a date within 90 days of the beginning of Year 1. Individual did not have proof of
mailing or delivery for Form 4876-A. Taxpayer has since prepared and submitted Form
1120-IC-DISC to the Service for all its taxable years since its incorporation on Date 1.
These include Taxpayer's Year 1 through Year 8 taxable years.

In correspondence dated Date 3, more than six years after Date 1, the Service informed
Taxpayer that Taxpayer's Form 1120-IC-DISC returns for Year 4 could not be
processed because there was no record of a Form 4876-A having been filed. Individual
and Tax Consultant represent that they repeatedly tried to confirm acceptance of the
Taxpayer's Form 4876-A with the Service but were unable to receive confirmation
because of limited staffing at the Service due to COVID-19.

In correspondence dated Date 4, the Service informed Taxpayer that Taxpayer's Form
1120-IC-DISC returns for Year 7 could not be processed because there was no record
of a Form 4876-A having been filed. When Tax Consultant called the Service, they
learned that the Service had no record of Form 4876-A.

On Date 5, Tax Consultant submitted a copy of the original signed Form 4876-A, but did
not submit proof of mailing, and instead submitted an affidavit signed by Individual
reporting the details of the mailing. The Service stated that the information submitted
was insufficient to demonstrate a timely filing of the election. Tax Consultant 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.

Taxpayer has provided a statement, as described in Treas. Reg. § 301.9100-3(c)(1)(ii),
from Independent Auditor considering the relevant circumstances of all affected parties
and confirming that the interests of the Government are not prejudiced under the
standards contained in Treas. Reg. § 301.9100-3(c)(1).

                                  LAW AND ANALYSIS

Section 992(b)(1)(A) of the Internal Revenue Code (the "Code") provides that an
election by a corporation to be treated as a DISC [1] 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.

Treasury Regulation § 301.9100-1(c) gives the Commissioner discretion to 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.

Treasury Regulation § 301.9100-3(b)(1)(v) provides that a taxpayer is generally deemed
to have acted reasonably and in good faith if the taxpayer reasonably relied on a
qualified tax professional, including a tax professional employed by the taxpayer, and
the tax professional failed to make, or advise the taxpayer to make, the election.

[1] As used in this letter, the terms "IC-DISC" and "DISC" have the same meaning.

Treasury Regulation § 301.9100-3(c)(1) provides the standards the Commissioner will
use to determine when the interests of the Government are prejudiced. Treas. Reg. §
301.9100-3(c)(1)(i) provides that the interests of the Government are prejudiced if
granting relief would result in a taxpayer having a lower tax liability in the aggregate for
all taxable years affected by the election than the taxpayer would have had if the
election had been timely made (taking into account the time value of money).

Treasury Regulation § 301.9100-3(c)(1)(ii) provides that the interests of the Government
are ordinarily prejudiced if the taxable year in which the regulatory election should have
been made or any taxable years that would have been affected by the election had it
been timely made are closed by the period of limitations on assessment under Code
section 6501(a) before the taxpayer's receipt of a ruling granting relief. However, the
Service may condition a grant of relief on the taxpayer providing the Service with a
statement from an independent auditor (other than an auditor providing an affidavit
pursuant to Treas. Reg. § 301.9100-3(e)(3)) certifying that the interests of the
Government are not prejudiced under the standards set forth in Treas. Reg. §
301.9100-3(c)(1)(i).

                                    CONCLUSION

Based on the facts and representations submitted with Taxpayer's ruling request, we
conclude that Taxpayer satisfies Treas. Reg. § 301.9100-3(a). Furthermore, although
under Treas. Reg. § 301.9100-3(c)(1)(ii) the interests of the Government are ordinarily
prejudiced if the taxable year in which the regulatory election should have been made
are closed by the period of limitations on assessment, Taxpayer submitted an affidavit
from an independent auditor certifying that the interests of the Government are not
prejudiced under the standards of Treas. Reg. § 301.9100-3(c)(1)(i).

Accordingly, Taxpayer is granted an extension of time of 90 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. [2]

In accordance with section 996(g), Taxpayer should not accept any income tax treaty
claims of reduced withholding under sections 1441 and 1442 with respect to
distributions (deemed or otherwise) of accumulated DISC income.

[2] For example, no opinion is expressed regarding the consequences to any person under section 996(g).

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 representative.

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.

The rulings contained in this letter are based upon information and representations
submitted by Taxpayer and Tax Consultant and accompanied by affidavits and 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. It is subject to verification
upon examination.

                                          Sincerely,

                                          ___________________________________
                                          L. Ulysses Chatman
                                          Senior Counsel, Branch 6
                                          Office of Associate Chief Counsel
                                          (International)

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

cc: