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

ServicesTax ServicesInternational Tax ServicesIC-DISC

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.