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A Message to Our Valued Clients

In the interest of public health and the safety of our community, and in compliance with Governor Cuomo’s executive order, Freed Maxick has suspended onsite client work and cancelled all office visits. Meanwhile, our team is working remotely to provide the same high-quality service you have come to expect. Utilizing the best technology at our disposal, we will continue to meet all of your audit, tax, and advisory needs and help you navigate the business implications of the pandemic as it unfolds. You can reach your Freed Maxick representative directly by email or phone, or contact our main line at 716.847.2651.

Import Export Tax Incentives - Buffalo Rochester NY
Import Export Tax Incentives - Buffalo Rochester NY
Import Export Tax Incentives - Buffalo Rochester NY
Import Export Tax Incentives - Buffalo Rochester NY

Tax Services

IC-DISC


Owner-managed exporting businesses can recoup – or even exceed – their tax savings by creating an interest charge-domestic international sales corporation (IC-DISC). The IC-DISC is not a tax shelter. Once a somewhat lackluster tax deferral vehicle, it was revamped under the Job and Growth Tax Relief Reconciliation Act of 2003. In its new form, the IC-DISC provides a permanent 10 to 20 percent tax savings for qualifying U.S. exporters. It also has a number of sophisticated features that can be tailored to help businesses meet objectives and goals.

The IC-DISC Structure

The IC-DISC is a relatively simple structure to implement. The IC-DISC is a “paper” entity and therefore does not require corporate substance or form, office space, employees or tangible assets. It simply serves as a conduit for export tax savings. Companies that qualify for this tax savings conduit are Manufacturers, Distributors, Software Companies, and Engineering and Architectural firms that work on buildings/structures in foreign locations.

An important feature of the IC-DISC is that shareholders can be corporations, partnerships, individuals or a combination of these.

How It Works

  • Owner-managed exporting entity creates a tax-exempt IC-DISC
  • Exporting entity pays IC-DISC a commission
  • Exporting entity deducts commission from ordinary income which could be taxed at up to 39.6%
  • IC-DISC pays no tax on the commission
  • Shareholders pay income tax on dividends at the capital gains rate of 20%
  • Result is 20% tax savings on commission

IC-DISC Advantage and Benefits

  • IC-DISC shareholdings can be used in a number of ways to help achieve business goals and objectives.
  • Increased liquidity for shareholders or the business to redeploy in other areas
  • Permanent tax savings on global sales
  • Ability to leverage cost of capital
  • Opportunities to create management incentives
  • Means to facilitate succession or estate planning

What We Can Do For You

  • Analyze the cost benefit of IC-DISC implementation
  • Work with you to determine qualifications of export sales
  • Use modeling software that allows us to help you achieve maximum benefit
  • Calculate allocations and apportionment methodology to increase benefits
  • Determine annual estimates and compliance requirements

To get the most out of an IC-DISC, including maximum tax savings, businesses should seek assistance from a qualified tax advisor with significant international tax and business planning experience. Freed Maxick is focused on mid-sized companies like yours. We understand your challenges and tailor our services to your needs – so you can get back to business. Call us today to learn about how our tax professionals can help you create an IC-DISC and to identify other innovative tax solutions.