The IC-DISC Tax Incentive: Five Things Most Small Businesses Don't Know

3 Minute Read
Posted by Randy Eickhoff on Aug 22, 2019 2:02:03 PM

The Interest-Charge Domestic International Sales Corporation (IC-DISC) program offers an export tax incentive for small- and mid-sized manufacturing entities. The benefit for qualifying exporters is significant, with eligible companies potentially saving up to 20 percent of the tax incurred on exported goods profits. Unfortunately, like so many other tax incentive programs, the many opportunities afforded from the IC-DISC tax benefit often get underutilized, or worse yet, overlooked completely.

Acena Consulting Specializes in IC-DISC Legislation and Incentives

At Acena Consulting, we've earned our reputation as a leading innovator within the research and development tax credit vertical. However, we also have extensive expertise with IC-DISC legislation and relevant incentives for manufacturing companies operating in virtually every capacity and niche across the country. We recognize that the confusion surrounding this program is one of the biggest reasons why business owners fail to capitalize on its many benefits. 

Understanding these five essential components of the IC-DISC initiative can help you maximize ROI with this generous tax program:

Who Qualifies for the IC-DISC Incentive? 
The first step in filing for the IC-DISC tax incentive is determining if your company meets the qualification requirements. Eligible companies typically fall into at least one of these three specific categories:

  • U.S.-based organization that directly exports goods to manufacturers
  • U.S.-based entity that manufactures a product that is included with other exported items 
  • U.S.-based business that provides engineering services for bridge or building construction being developed outside the country

How Many Companies Qualify for the Tax Benefit?
There is no limit to the number of companies that can claim the IC-DISC incentive each year. While thousands of small and mid-sized enterprises tap into the program on an annual basis, there are often thousands more that are eligible, but fail to claim the credit.

Does Claiming the IC-DISC Credit Mean We'll Be Audited?
An IRS tax audit is always possible when claiming a benefit, and the IC-DISC program is no exception. Regulatory and legislative mandates have prompted the IRS to ensure all filing organizations have followed the necessary rules and requirements. The best way to reduce the chance of an audit is to focus on four key factors in the filing process:

  • Ensure the Domestic International Sales Corporation (DISC) is accurately created and maintained
  • Determine that the exported property does qualify as an eligible U.S. exporting good
  • Check that all commissions are appropriately calculated
  • Avoid any documented errors or miscalculations on form 1120

What's the Most Common Misconception or Mistake Surrounding IC-DISC Businesses
There's always a chance of a commission miscalculation or documentation error when filing for the IC-DISC program, particularly for businesses that attempt to manage the process using internal resources. However, the biggest mistake that companies make with the Interest-Charge Domestic International Sales Corporation is not knowing they are eligible for the benefit if they make a component that's included in an exported product. This misconception can prove costly for enterprises that don't realize they qualify for the program and fail to file their claim.

What's the Best Way to Start the Process?
The best way to determine if your business qualifies for the IC-DISC incentive program is to partner with an outside tax accountant that is proficient with the laws and conditions of the benefit. An experienced tax professional will work with your organization to establish your status as an eligible entity, helping you tap into the many advantages offered by this program.

Acena Consulting can help you determine IC-DISC qualification. Contact us today to hear more.


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Randy Eickhoff

Randy Eickhoff

Acena Consulting President Randy Eickhoff, licensed CPA, has partnered with more than 200 companies during more than 20 years of experience securing tax credits and other government incentives. His corporate partners range from multinational technology firms to smaller, privately held manufacturing, sports, and technology enterprises.