Exporter gets more time to elect IC-DISC status after filing the election three days late

Plain-English summary

An interest-charge domestic international sales corporation (IC-DISC) is a special export-incentive entity that lets a related U.S. business defer some tax on export income. To be one, a corporation must file Form 4876-A within 90 days after the start of its first tax year. Here a family-owned business set up such an entity and hired an accounting firm to handle the paperwork, but the firm filed Form 4876-A on day 93, three days late. When the IRS later flagged that no valid election was on file, the company asked for relief under the section 301.9100 regulations, which allow extra time for a missed regulatory election when the taxpayer acted reasonably and in good faith and relief will not prejudice the government. Because the election year was already closed by the statute of limitations, the company also provided a certification from an independent auditor that the government's interests were not prejudiced. The IRS granted the relief. The company has 90 days from the ruling to file Form 4876-A, which will then count as a timely IC-DISC election for its first tax year. The IRS cautioned that this does not decide whether the company actually qualifies for IC-DISC status. This is a routine cure for a preparer's three-day filing miss.

Ruling snapshot

• Question: Should a corporation get an extension of time under § 301.9100-3 to file Form 4876-A electing IC-DISC status after its accountant filed it three days late?
• Outcome: Approved (90 days from the ruling to file the election)
• Key authorities: IRC § 992(b); Temp. Treas. Reg. § 1.921-1T(b)(1); Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202506010 Third Party Communication: None
Release Date: 2/7/2025 Date of Communication: Not Applicable
Index Number: 9100.00-00, 992.02-00
Person To Contact:
--------------------- ----------------------, ID No. -----------------

------------------------------ Telephone Number:
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Refer Reply To:
CC:INTL:B06
In Re: ------------------------------ PLR-113422-24
Date:
November 12, 2024

                                              TY: -------

Legend

Taxpayer = ------------------------------
Accounting Firm = -----------------------------
Company = ------------------------------
Individual 1 = ---------------------
Individual 2 = --------------------------
Individual 3 = ------------------------
Independent Auditor = ----------------------
Date 1 = ------------------
Date 2 = ------------------
Date 3 = ----------------------
Date 4 = -----------------------
Date 5 = -------------------
Year 1 = -------

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

This responds to correspondences dated July 1, 2024, and October 21, 2024, 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.

                                           FACTS

Taxpayer and Company are domestic corporations wholly owned by individuals 1, 2,
and 3. Taxpayer was formed to serve as an interest charge domestic international sales
corporation ("IC-DISC") and has established a commission arrangement with Company.
Individual 1 is president of both Taxpayer and Company, while Individual 2 is Treasurer
of both Taxpayer and Company.

Company decided to establish an IC-DISC and engaged Accounting Firm to organize
and prepare all documents and filings needed to establish Taxpayer as in IC-DISC. On
Date 1, Taxpayer was incorporated with Accounting Firm's assistance.

Accounting Firm completed Form 4876-A and delivered it to Taxpayer on Date 2. Due to
an inadvertent oversight by Accounting Firm, Taxpayer failed to file Form 4876-A within
90 days of Date 1. It instead filed Form 4876-A on Date 3, 93 days after Date 1.

Taxpayer filed Form 1120 IC-DISC for Year 1, Taxpayer's first taxable year, on Date 4.
In correspondence dated Date 5, less than a year from Date 1, the Service informed
Taxpayer that an approved Form 4876-A was not on file because Taxpayer had not
timely filed Form 4876-A.

Taxpayer and Accounting firm discussed how to best seek relief after Taxpayer learned
it had not timely filed a valid IC-DISC election, and Accounting Firm eventually
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 has provided a
statement from Independent Auditor as described in Treasury Regulation § 301.9100-
3(c)(1)(ii) 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 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.

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.

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

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.

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 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 the 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.

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.

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

                                             Sincerely,

                                             _____________________________________
                                             Michelle Ng
                                             Senior Technical Reviewer, Branch 6
                                             Office of Associate Chief Counsel (International)

Enclosures (3)
Copy of this letter
Copies for § 6110 purposes

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