Benefits of an IC-DISC
R&D TAX CREDIT and FEDERAL & STATE TAX ADVISORY SERVICES
The Interest Charge Domestic International Sales Corporation (IC-DISC) is the one remaining export incentive and its use results in permanent tax savings for U.S. exporters and their stakeholders of 10% or higher of net export income. The IC-DISC was first enacted by Congress in 1971 to encourage U.S. export trade to strengthen the economy and to reduce the incentive for U.S. companies to shift manufacturing operations abroad. Now, the IC-DISC provides significant and permanent tax savings for producers and distributors of U.S. made products used abroad by allowing companies to defer income, with interest charged on the deferred tax.
Which businesses may qualify for an IC-DISC?
IC-DISC benefits are available to qualified producers or distributors that are either directly involved in exporting, or selling products to distributors or wholesalers who resell for use outside of the U.S. Exporters that are good candidates for the IC-DISC include, but are not limited to, the following:
This includes, but not limited to traditional manufacturers as well as those who grow agriculture products, extract minerals, distribute U.S. made goods, and develop software. Engineering and architectural services related to foreign construction projects are also included.
How does IC-DISC work?
The owner of the operating company forms a tax-exempt IC-DISC. The IC-DISC must maintain its own bank account, accounting records and file U.S. tax returns, but otherwise there are no changes to business operations.
What are the requirements and qualifications for the IC-DISC?
In order to take advantage of the tax benefits provided by the IC-DISC, the U.S. exporter has to satisfy several requirements, and the IC-DISC has to pass some tests to qualify as an IC-DISC. The U.S. exporter has to meet the following requirements: