In IRS Advice Memorandum AM 2022-005, the Office of Chief Counsel reaffirmed that distributions from a Domestic International Sales Corporation (DISC) to foreign shareholders are treated as effectively connected income (ECI) under Internal Revenue Code § 996(g), even where an applicable U.S. income tax treaty would otherwise provide reduced withholding rates on dividends. This position […]
Taxpayers utilizing an IC-DIS should note the continuing importance of Schedules K-2 and K-3 in reporting international income. Since 2022, S corporations and partnerships receiving IC-DISC dividends must include this information to comply with the requirements of Schedule K-2/K-3. Although IC-DISCs are domestic entities (Treas. Reg. § 1.992-1(a)(1)), dividends paid by an IC-DISC are classified […]
The IRS’s expanded international reporting requirements have made it essential for S corporations and partnerships with IC-DISCs to understand how to properly report dividends on Form Schedule K-2/K-3. Below is a summary of key developments that may affect Forms 1120S or 1065. 1. Schedule K-2/K-3 Applies to Pass-Through Entities with International Activity 2. IC-DISC Dividends […]
Export-driven tax breaks give U.S. companies a powerful way to keep more of every overseas sale. The primary US-based tax incentives for exporters are the Interest Charge Domestic International Sales Corporation (IC-DISC) and Foreign Derived Intangible Income (FDII). An IC-DISC is a separately formed business entity that makes a commission on certain export sales. The […]
In today’s complex tax environment, the DISC tax structure continues to be a critical tool for U.S. exporters aiming to stay competitive in global markets. For U.S. companies that export products or services, the Interest Charge Domestic International Sales Corporation (IC-DISC) remains a powerful and often underutilized federal income tax incentive. By implementing the right […]
The Interest Charge Domestic International Sales Corporation (IC-DISC) is the last surviving federal tax incentive specifically designed to promote U.S. export sales. Established by Congress in 1971, the IC-DISC provides substantial federal income tax savings — but only when businesses strictly follow IC-DISC rules. IC-DISC rules are the legal requirements companies must meet to form, […]
For U.S. exporters, the Interest Charge Domestic International Sales Corporation (IC-DISC) offers a valuable tax benefit—deferred federal income tax on export profits. However, to take full advantage of these savings, companies must adhere to specific regulations, including the IC-DISC Commission Payment Rules, which mandate timely commission payments. The IC-DISC program is built around the concept […]
For exporters using the Interest Charge Domestic International Sales Corporation (IC-DISC) structure, staying compliant with IRS regulations is essential to maintaining tax benefits. One key requirement is IRS Form 8404, Interest Charge on DISC-Related Deferred Tax Liability, which calculates the interest charge on deferred taxes tied to IC-DISC profits. Why is Form 8404 Important? With […]
Exporting is an essential part of the global economy, and the U.S. is a major player in international trade. Taxing exports refers to the practice of imposing taxes or levies on goods and services that are sold and shipped out of a country to foreign markets. While many countries impose direct taxes on exports, the […]
For U.S. exporters, the Interest Charge Domestic International Sales Corporation (IC-DISC) is a powerful but often underutilized tax savings tool. Originally enacted by Congress in 1971, IC-DISC remains the last significant federal tax incentive designed to support businesses that sell goods or services outside the United States. By leveraging IC-DISC, eligible companies can significantly reduce […]
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