IC-DISC
Export Tax Incentive
- Businesses can save up to 17% on their export income taxes.
- IC-DISC is the last available export incentive offered by the IRS.
- Many manufacturing, software, architectural and engineering, distribution, and agricultural businesses are unaware that
they are able to utilize the IC-DISC benefit.
- Businesses can save up to 17% on their export income taxes.
- This incentive has been available to American businesses since 1971.
- IC-DISC is the last available export incentive offered by the IRS.
- If your company exports goods manufactured in the U.S., your company likely qualifies to benefit from IC-DISC tax savings.
- Many manufacturing, software, architectural and engineering, distribution, and agricultural businesses are unaware that they are able to utilize the IC-DISC benefit.
- An IC-DISC (Interest Charge Domestic International Sales Corporation) is a separate entity that elects to be treated as an IC-DISC and must file a separate tax return. alliantgroup is well equipped to handle the incorporation and filing process associated with this entity, helping U.S. businesses remain competitive in foreign markets.
NEED HELP WITH IC-DISC?
Fill out the form to receive more information
IC-DISC | Contact Us | New
Contact us to receive more information about the IC-DISC
Success Stories from Our Clients
- Manufacturing
- Distribution
- Software & Tech
- Architecture
- Agriculture
Wholesale Producer
EXPORT REVENUE:
$260 Million
BENEFIT:
$2.5 Million
QUALIFICATIONS:
- Mass producing multiple product lines of foodstuffs through the use of economies of scale
- Exporting final products for ultimate use outside of the United States
- Utilizing domestic materials in manufacturing of final product
Industrial Manfacturer
EXPORT REVENUE:
$140 Million
BENEFIT:
$660,000
QUALIFICATIONS:
- Designing and developing aerospace components
- Manufacturing components into a completed product
- Exporting final products for ultimate use outside of the United States
- Utilizing domestic materials in manufacturing of final product
Foodstuffs Distributor
EXPORT REVENUE:
$26.5 Million
BENEFIT:
$60,000
QUALIFICATIONS:
- Sourcing products from domestic manufacturers
- Exporting final products for ultimate use outside of the United States
Game Developer
EXPORT REVENUE:
$9.2 Million
BENEFIT:
$210,000
QUALIFICATIONS:
- Designing and developing software within the United States
- Implementing various updates to the software
- Selling software for ultimate use outside of the United States
Architectural Firm
EXPORT REVENUE:
$11.1 Million
BENEFIT:
$80,000
QUALIFICATIONS:
- Completing architectural services for projects planning to be located outside of the United States
- Conducting feasibility studies
- Developing concept and schematic designs
Beef Processing Company
EXPORT REVENUE:
$14 Million
BENEFIT:
$300,000
QUALIFICATIONS:
- Processing of cattle into beef & related byproducts
- Exporting final products for ultimate use outside of the United States
- Utilizing domestically raised cattle
- Industrial Manufacturing
- Wholesale Production
- Distribution
- Software & Tech
- Architecture
- Agriculture
Aerospace Manufacturer
EXPORT REVENUE:
$140 Million
BENEFIT:
$660,000
QUALIFICATIONS:
- Designing and developing aerospace components
- Manufacturing components into a completed product
- Exporting final products for ultimate use outside of the United States
- Utilizing domestic materials in manufacturing of final product
Battery Manufacturer
EXPORT REVENUE:
$253 Million
BENEFIT:
$200,000
QUALIFICATIONS:
- Designing and manufacturing battery components
- Exporting components for ultimate use outside of the United States
- Utilizing domestic materials in manufacturing of components
Foodstuffs Producer
EXPORT REVENUE:
$260 Million
BENEFIT:
$2.5 Million
QUALIFICATIONS:
- Mass producing multiple product lines of foodstuffs through the use of economies of scale
- Exporting final products for ultimate use outside of the United States
- Utilizing domestic materials in manufacturing of final product
Cosmetics Producer
EXPORT REVENUE:
$22 Million
BENEFIT:
$85,000
QUALIFICATIONS:
- Mass producing multiple product lines of cosmetics through the use of economies of scale
- Exporting final products for ultimate use outside of the United States
- Utilizing domestic materials in manufacturing of final product
Foodstuffs Distributor
EXPORT REVENUE:
$26.5 Million
BENEFIT:
$60,000
QUALIFICATIONS:
- Sourcing products from domestic manufacturers
- Exporting final products for ultimate use outside of the United States
E-Liquid Distributor
EXPORT REVENUE:
$4.6 Million
BENEFIT:
$25,000
QUALIFICATIONS:
- Sourcing products from domestic manufacturers
- Exporting final products for ultimate use outside of the United States
Game Developer
EXPORT REVENUE:
$9.2 Million
BENEFIT:
$210,000
QUALIFICATIONS:
- Designing and developing software within the United States
- Implementing various updates to the software
- Selling software for ultimate use outside of the United States
Simulation Software Developer
EXPORT REVENUE:
$3.8 Million
BENEFIT:
$140,000
QUALIFICATIONS:
- Designing and developing software within the United States
- Customizing software utilizing customer collaboration and an in-depth design process
- Selling software for ultimate use outside of the United States
Architectural Firm
EXPORT REVENUE:
$11.1 Million
BENEFIT:
$80,000
QUALIFICATIONS:
- Completing architectural services for projects planning to be located outside of the United States
- Conducting feasibility studies
- Developing concept and schematic designs
Architectural Firm
EXPORT REVENUE:
$15 Million
BENEFIT:
$35,000
QUALIFICATIONS:
- Completing architectural services for projects planning to be located outside of the United States
- Conducting feasibility studies
- Developing concept and schematic designs
Beef Processing Company
EXPORT REVENUE:
$14 Million
BENEFIT:
$300,000
QUALIFICATIONS:
- Processing of cattle into beef & related byproducts
- Exporting final products for ultimate use outside of the United States
- Utilizing domestically raised cattle
Beef Processing Company
EXPORT REVENUE:
$15.7 Million
BENEFIT:
$290,000
QUALIFICATIONS:
- Processing of cattle into beef & related byproducts
- Exporting final products for ultimate use outside of the United States
- Utilizing domestically raised cattle
IC-DISC Requirements
Destination
Product must be shipped outside the United States to a foreign user.
Fair Market Value
No more than 50% of the selling price of the product can be attributable to foreign components.
Manufacturing
Must be a product originating from the U.S.
- Destination – Product must be sold to foreign user and be shipped within onkmkre year of sale
- Fair Market Value – No more than 50% of the selling price of the product can be attributable to foreign components
- Manufacturing – Must be a product originating from the U.S. (U.S. good or service) (Specifically for manufacturing companies)
- Substantial in Nature – A manufacturing process recognized in the industry;
- Substantial Transformation – A product must be consist of raw materials or parts that are substantially changed and not easily deconstructed; or
- Safe Harbor Rule – At least 20% of the products costs must consist of conversion costs such as labor and overhead.
The Last of the Export Incentives
In the wake of changes to the Extraterritorial Income Exclusion (EIE) created by the American Jobs Creation Act of 2004, the EIE has been repealed from the Internal Revenue Code beginning in 2005. The phase-out period lasted for 2 years (2005 – 2006) and the EIE officially disappeared after 2006. Unfortunately, the EIE has gone the way of other export incentives for U.S. companies due to the imposition of economic sanctions by the World Trade Organization (WTO).
However, there is one export incentive that remains intact and is now more attractive than ever due to the lowered rate of tax dividends created by the Job and Growth Tax Relief Reconciliation Act of 2003. The Interest-Charge Domestic International Sales Corporation (IC-DISC) has survived the repeals of U.S. export incentives since 1984 and has never been targeted by the WTO.
Deriving tax benefits through an IC-DISC is slightly more complicated than the EIE because the latter simply requires the completion of Form 8873 to calculate the exclusion. By contrast, an IC-DISC is a separate domestic corporation that must formally elect to be treated as an IC-DISC and is required to maintain a separate bank account and set of accounting books. The IC-DISC must also file an annual U.S. income tax return even though it pays no U.S. income taxes.
Deriving tax benefits through an IC-DISC is slightly more complicated than the EIE because the latter simply requires the completion of Form 8873 to calculate the exclusion. By contrast, an IC-DISC is a separate domestic corporation that must formally elect to be treated as an IC-DISC and is required to maintain a separate bank account and set of accounting books. The IC-DISC must also file an annual U.S. income tax return even though it pays no U.S. income taxes.
Deriving tax benefits through an IC-DISC is slightly more complicated than the EIE because the latter simply requires the completion of Form 8873 to calculate the exclusion. By contrast, an IC-DISC is a separate domestic corporation that must formally elect to be treated as an IC-DISC and is required to maintain a separate bank account and set of accounting books. The IC-DISC must also file an annual U.S. income tax return even though it pays no U.S. income taxes.
Who Qualifies for the IC-DISC?
Exporters that are good candidates for the IC-DISC include, but are not limited to, the following:
- Manufacturers that directly export their products
- Manufacturers that sell products that are destined for use overseas
- Architectural and engineering firms who work on projects that will be constructed abroad (even though the work is performed in the United States.)
- Pass-through entities and privately held corporations
Why an IC-DISC Now?
The benefits available under the IC-DISC regime are effective on a go forward basis, rather than being available for all prior operating tax periods (as was the case with the Extraterritorial Income Exclusion “EIE”). Because of this, the longer a taxpayer waits to form an IC-DISC, the less their available benefits will be. In addition, with the repeal of the EIE, the IC-DISC is the last export incentive available to U.S. companies.
alliantgroup IC-DISC Services
What are the benefits of an IC-DISC?
Under an IC-DISC strategy, the exporter pays commissions to the IC-DISC. The commissions are deductible to the exporter, and the deemed or actual dividend payment of the commission income in the IC-DISC is taxed to the exporter’s shareholders or partners at a favorable 20% rate. Thus, on one hand, the exporter receives a deduction of 35% on the commission payments made to the IC-DISC, and on the other hand, only pays a 20% tax rate on the income repatriated from the IC-DISC. This results in a permanent tax saving for U.S. exporters and their shareholders of 10% or higher of net export income.
alliantgroup provides customized services to meet the needs of each individual client. Services provided range from an initial benefit assessment to a full-scale IC-DISC implementation and outsourcing service.
Benefit Assessment and Feasibility Study
alliantgroup offers a basic assessment of the potential benefits of using an IC-DISC with readily available data from the client. alliantgroup also provides a feasibility study given the company’s available data and circumstances.
Data Analysis and Documentation
alliantgroup analyzes the company’s self-prepared data and identifies the grouping and intercompany pricing rules that will maximize tax savings.
Full-Scale IC-DISC Outsourcing Service
For companies wishing to outsource the implementation and preparation of the IC-DISC calculations and supporting documentation, alliantgroup and its associated counsel will work with the company’s accounting and information systems personnel to develop each requisite piece of information including the final transactional database. Once the transactional database and supporting schedules have been prepared, alliantgroup will perform the same steps outlined above for the data analysis and documentation. With renewed emphasis on internal controls and documentation under Sec. 404 of Sarbanes-Oxley, companies may benefit from alliantgroup’s full-scale outsourcing service that, along with the company’s CPA, documents all the necessary procedures, schedules, and final reconciliations required by the IRS for IC-DISC tax benefits.
Tax Benefit Illustration
Company Without an IC-DISC | |
|---|---|
Foreign Trading Gross Receipts | $10,000,000 |
Cost of Goods Sold | $6,000,000 |
Selling, General and Administrative | $3,000,000 |
Export Net Income | $1,000,000 |
Tax Rate | 35% |
Tax Paid | $350,000 |
Company With an IC-DISC | |||
|---|---|---|---|
Foreign Trading Gross Receipts | $10,000,000 | ||
Cost of Goods Sold | $6,000,000 | ||
Selling, General and Administrative | $3,000,000 | ||
Export Net Income | $1,000,000 | $1,000,000 | |
IC-DISC Commission Deduction | ($500,000) | $500,000 | |
Tax Base After IC-DISC Commission | $500,000 | $500,000 | |
Tax Rate | 35% | 15% | |
Tax Paid | $175,000 | $75,000 | |
IC-DISC Net Tax Savings $350,000 – ($175,000 + $75,000) = $100,000 |
Why alliantgroup?
We are the leading experts in tax credits and incentives. Since 2002, we have helped US businesses grow their operations and stay ahead of the competition. To date, we have delivered billions in refunds to over 27,000 businesses.
800+ Industry Experts
Our professionals know your business inside and out and know what qualifies to ensure the most lucrative refund. No other firm offers professionals versed in your industry.
Four Former IRS and Division Commissioners
Our former commissioners are the preeminent experts on IRS policy and ensure our practices and procedures align with the service’s expectations. No other firm offers this level
of oversight.
Former Legislators
Our former policymakers understand the intent of tax law and why they apply to your business. As part of our team, they advocate for our clients and help them take advantage of federal funds. No other firm understands tax law to this extent.
NEED HELP WITH IC-DISC?
Fill out the form to receive more information
IC-DISC | Contact Us | New
Contact us to receive more information about the IC-DISC
IC-DISC
The Last of the Export Incentives
• Businesses are able to save up to 17% on their export income taxes
• This incentive has been available to American businesses since 1971
• IC-DISC is the last available export incentive offered by the IRS
• If your company exports goods manufactured in the U.S., your company likely qualifies to benefit from IC-DISC tax savings
• Many software, architectural and engineering, distribution, and agricultural businesses are unaware that they are able to utilize the IC-DISC benefit
• An IC-DISC (Interest Charge Domestic International Sales Corporation) is a separate entity that elects to be treated as an IC-DISC and must file a separate tax return. Alliantgroup is well equipped to handle the incorporation and filing process associated with this entity, helping U.S. businesses remain competitive in foreign markets.
IC-DISC
The Last of the Export Incentives
• Businesses are able to save up to 17% on their export income taxes
• This incentive has been available to American businesses since 1971
• IC-DISC is the last available export incentive offered by the IRS
• If your company exports goods manufactured in the U.S., your company likely qualifies to benefit from IC-DISC tax savings
• Many software, architectural and engineering, distribution, and agricultural businesses are unaware that they are able to utilize the IC-DISC benefit
• An IC-DISC (Interest Charge Domestic International Sales Corporation) is a separate entity that elects to be treated as an IC-DISC and must file a separate tax return. Alliantgroup is well equipped to handle the incorporation and filing process associated with this entity, helping U.S. businesses remain competitive in foreign markets.
IC-DISC Requirements
- Destination – Product must be sold to foreign user and be shipped within onkmkre year of sale
- Fair Market Value – No more than 50% of the selling price of the product can be attributable to foreign components
- Manufacturing – Must be a product originating from the U.S. (U.S. good or service) (Specifically for manufacturing companies)
- Substantial in Nature – A manufacturing process recognized in the industry;
- Substantial Transformation – A product must be consist of raw materials or parts that are substantially changed and not easily deconstructed; or
- Safe Harbor Rule – At least 20% of the products costs must consist of conversion costs such as labor and overhead.