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An IC-DISC audit can involve much more than a review of the Form 1120-IC-DISC filed with the IRS. Depending on the scope of the examination, a business may need to substantiate its IC-DISC election, qualified export receipts, qualified export assets, export property, commission calculations, accounting records, and the underlying transactions used to determine the IC-DISC […]

An IC-DISC can provide significant federal income tax benefits to qualifying U.S. exporters. But those benefits depend on more than establishing the corporation and filing Form 1120-IC-DISC each year. IC-DISC risk management is the process of identifying, monitoring, documenting, and controlling the tax, accounting, operational, and compliance risks that can affect an IC-DISC’s qualification or […]

What is a related supplier agreement in export tax management?  It is a legally binding contract executed between a U.S. operating export company (the related supplier) and its Interest Charge Domestic International Sales Corporation (IC-DISC). Its primary purpose is to establish the legal framework for calculating, documenting, and paying tax-deductible commissions or transfer prices to […]

A company does not necessarily need to sell directly to a foreign customer to receive IC-DISC tax benefits. Indirect exports may qualify when products sold to a U.S. distributor, reseller, freight forwarder, or other intermediary are ultimately delivered, used, or consumed outside the United States. The destination of the product, not simply the address shown […]

If your company exports goods or services and you’re not taking advantage of the IC-DISC for U.S. Exporters, you’re likely missing out on substantial and legal federal tax savings. What is IC-DISC for U.S. Exporters? Why it matters: An Interest Charge Domestic International Sales Corporation (IC-DISC) is the only remaining federal export tax incentive in […]

Architectural and engineering firms can qualify for IC-DISC benefits, but only for a narrow category of foreign-project services. The governing rule is that gross receipts for engineering or architectural services are qualified export receipts only if the services relate to construction projects located, or proposed for location, outside the United States. Those receipts can help […]

IC-DISC benefits can apply to export sales involving related foreign distribution structures, including a foreign disregarded entity or branch and a controlled foreign affiliate, but the IC-DISC rules and section 482 transfer pricing rules are separate regimes and both must be satisfied. A sale may qualify as a DISC sale even when the immediate customer […]

An IC-DISC is not free to choose any convenient year-end. Although taxpayers generally compute taxable income based on their taxable year under IRC section 441(a), Congress imposed a special rule for DISCs. Under section 441(h)(1), the taxable year of a DISC is the taxable year of the shareholder, or group of shareholders with the same […]

Tax-exempt organizations often assume that dividend income is excluded from unrelated business taxable income. That is usually true under IRC section 512(b)(1), which excludes dividends, interest, annuities, and similar passive income from UBTI [2]. But IC-DISC investments are an important exception. An IC-DISC is generally not taxed at the corporate level; instead, its shareholders are […]

Foreign contract manufacturing can satisfy the 20-percent conversion-cost test, but that cuts both ways for IC-DISC purposes. If the foreign contractor’s work is treated as manufacturing because the seller’s contract price for that work equals at least 20 percent of the seller’s cost of goods sold or inventory amount for the property, the property has […]