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IC DISC

Export products and services? You may qualify.

IC DISC

The Last Remaining Export Incentive

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What Qualifies?

An IC DISC (Interest Charged - Domestic International Sales Corporation) is a US corporation that is set up for privately-held US companies that export products or services. Exports can include destinations such as Canada and Mexico and provide significant tax benefits to the owners of the exporting company.

Qualifying products are those that are manufactured, produced, grown or extracted in the US that are then exported.

Not more than 50% of the fair market value of the product is attributable to articles imported into the United States.

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What Doesn't Qualify?

Property leased or rented by a DISC for use by any member of a controlled group which includes the DISC.

Patents, inventions models, designs, formulas, or processes, whether or not patented, copyrights (other than films, tapes, records or similar reproductions, for commercial or home use), goodwill, trademarks, trade brands, franchises or other like property.

Products of a character with respect to which a deduction for depletion is allowable (including oil, gas, coal, or uranium products).

Products the export of which is prohibited or curtailed under section 7(a) of the Export Administration Act of 1979 relating to the protection of the domestic economy.

Unprocessed timber which is a softwood.

Download our free IRS IC-DISC Audit Guide to get more information:

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What's the Benefit?

The IC DISC pays a qualified dividend to its shareholders that is taxed at the qualified dividend rate of 15% (or 20%).

Sales commissions are paid to the IC DISC by the related supplier. The supplier company receives a current year ordinary deduction for the sales commissions generating a 35% tax benefit.

The IC DISC pays a qualified dividend to its shareholders that is taxed at the qualified dividend rate of 15%.

The net result is a permanent tax savings of 20%.

How do you calculate the sales commission paid to the IC DISC?

The sales commission paid can be calculated a number of ways. Generally, the amount is the greater of:

4% Gross Revenue Method

50% Full-Cost Combined Taxable Income

50% Marginal-Cost Combined Taxable Income

The Internal Revenue Code and Treasury Regulations allow taxpayers to analyze each individual transaction based upon costs allocated to it to determine the best method. This approach, termed, transaction-by-transaction or T by T can increase the overall benefit to the taxpayer substantially.

Contact Acena to talk about how your business can benefit from IC-DISC:

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Happy Clients

See what just one of our satisfied clients has to say about Acena Consulting

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"Impressive and responsive service. Acena Consulting successfully steered our client through a state audit of their R&D tax credit. They bring strong technical knowledge backed up with a detailed report providing project-level information. Our client has better and more detailed documentation as a result of Acena's efforts and counsel." -H.P. Tax Partner, Phoenix, AZ

IC-DISC AND THE IRS APPROACH

Want better insights into the IC-DISC and the IRS approach to auditing? Download our free guide: IC-DISC - IRS Audit Techniques

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