IC-DISC: Mastering the Intricacies of the Key Federal Tax Incentive for Exporters

Description

Currently, only one federal tax incentive exists on the books for businesses with export income: the IC-DISC. With an increase of more than 100% of small to medium-sized exporters since 1992, accounting firms of all sizes can't afford to be in the dark on this lucrative planning strategy.

An IC-DISC, or Interest Charge-Domestic International Sales Corporation, can offer exporters a substantial tax savings by letting them create a books-only entity that pays tax on export income at a 15% capital gains rate rather than a 35% income tax rate.

Accounting professionals and corporate tax specialists must prepare to navigate the highly detailed and often confusing aspects of IC-DISCs. Problems can arise in entity formation, asset management among IC-DISC shareholders, and accurately completing required IRS reports, among other areas.

Listen as our panel of veteran advisors prepares you for the complexities of IC-DISC formation and management in order to capitalize on this lucrative tax-saving strategy.

Outline

1. Background And Tax Benefits Of IC-DISCs
   1. How the IC-DISC came to be
      1. The phase-out of the EIE export incentive
      2. The reduction of the federal capital gains rate
   2. Tax benefits of IC-DISCs
      1. Deferred tax on commissions
      2. Tax paid at reduced 15% capital gains rate, increasing advantage over income tax rate
      3. Maintaining flow-through of commissions as dividends
2. Maximizing Tax Benefits of the IC-DISC
   1. Meeting IRS requirements
      1. Satisfying the 95% export gross receipts test
      2. Satisfying the 95% qualified export assets test
   2. Meeting the three tests for “buy-sell” DISCs
      1. The manufacturing origin requirement
      2. The destination of exports requirement
      3. The 50% U.S. content requirement
3. Implementing Various Ownership Structures for the IC-DISC
   1. Privately-held company: C, S, LLC partnership
   2. Publicly-traded corporation
   3. Individual Retirement Account (IRA) and Roth IRA
   4. Estate planning, executive compensation
   5. Treaty Benefits
   6. Sourcing Benefits
4. Compliance and Reporting By IC-DISCs
   1. Calculating the amount of commissions
      1. 4% gross receipts calculation
      2. 50% taxable income calculation
   2. Complying with the No-Loss Rule
   3. Completing IRS Form 1120-IC-DISC
   4. Avoiding and adapting to potential pitfalls of the IC-DISC

Benefits

The panel guides you through every critical aspect of IC-DISC creation and tax planning, including:

• Maximizing the unique IC-DISC tax benefits.
• Meeting the three requirements to receive income from export property sales.
• Structuring the IC-DISC entity in order to provide liquidity for the parent and shareholders.
• Completing IRS Form 1120-IC-DISC, the unique tax return that applies only to the IC-DISC entity.

CPE Credit

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