Difference between IC-DISC and FDII

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It can be confusing to read about these acronyms, definitions, and tax-related words. We’re here to help make sense of it. Stay with us as we do our best to explain the difference between IC-DISC and FDII.

What is IC-DISC

IC-DISC stands for “The Interest Charge Domestic International Sales Corporation” and is not subject to federal income tax on qualifying export income.

If you export property out of the United State, it may be qualified for tax incentives.

if you’re wondering what things are considered taxable, here’s a  simple definition:

Export property is qualified property that is manufactured, produced, grown or extracted in the U.S., and is held in the ordinary course of business for use, consumption and disposition outside of the U.S. Qualified export receipts include, but are not limited to, gross receipts from:

  • The sale, exchange, or other disposition of export property;
  • The lease, license or rental of export property used outside the U.S. (including software);
  • Services related to the qualified sale, exchange, lease, rental, or disposition of export property; and
  • Engineering or architectural services for construction projects outside the U.S.*

What is FDII

FDII stands for “Foreign Derived Intangible Income” and C corporations with foreign-derived intangible income can benefit from a 37.5% deduction in 2019.**

If you are a US company that makes products in another country, you may qualify for FDII.

Which one is better

Unlike the IC-DISC provisions, FDII does not contain the restrictions that require that products be manufactured and substantially improved in the United States.***

If you have products in the US, then IC-DISC is for you. If your business is located in the United States but it makes products off-shore, then you may qualify for FDII.

We’d love to get to know you. Contact us to learn how we can help your business receive the tax benefits it deserves.


Footnotes:

*Andersen: For the Record

**The Journal of Accountancy

***Kaufman | Rossin

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