CLIENT LOGIN | CONTACT US  
Link to Home page
Link to About Export Assist
Link to Export Assist Advantage
Link to Credit and Finance Services
Link to Export Tax Benefits
Link to Education and Training
Link to Export Information Resources
 
 
INTEREST CHARGE DOMESTIC INTERNATIONAL SALES CORPORATION (IC-DISC)

The Interest Charge Domestic International Sales Corporation (IC-DISC) encourages export activity by allowing tax deferral within the IC-DISC while it is engaged in export-related activity. Export Assist performs all IC-DISC incorporation, implementation, general accounting and ongoing management services including assistance with preparation of IRS Form 1120 IC-DISC, thereby helping to ensure IC-DISC legal and tax compliance. Export Assist can incorporate your IC-DISC within 24 to 48 hours at which time IC-DISC benefits begin.

For a detailed analysis and FREE IC-DISC Tax Benefit Report, please complete our online IC-DISC Inquiry Form and send it directly to us. We will process the report immediately. Should you have any questions, contact Ms. Tamara Crews, Vice President - Professional Markets, at 800-894-8366 or tcrews@exportassist.com. There is no cost or obligation and all information is confidential.

.

IC-DISC Structure
The IC-DISC is a domestic corporation that has a single class of stock with a minimum par value of $2,500. An IC-DISC election must have been made and not terminated, and it must meet the following requirements:

  • 95% Qualified Gross Receipts Test
    • sales of certain qualified export property
    • dividends
    • interest on any obligation that is a qualified export asset
    • managerial services
  • 95% Qualified Export Asset Test
    • accounts receivable
    • funds for investment
    • obligations of Ex-Im Bank and PEFCO
    • reasonable working capital
    • obligations arising from producers’ loans
    • stock certificates of related foreign export corporations, i.e., VIEXCO incorporated as a Foreign International Sales Corporation (FISC).


In order to qualify for an IC-DISC, the U.S. exporter must have export property that:

  • is manufactured, produced, grown or extracted in the United States by a person other than an IC-DISC
  • is held primarily for sale, lease or rental for direct use, consumption or disposition outside the United States
  • contains a minimum of 50% U.S. content.

The deferred income of the IC-DISC is calculated based on the combined income and expenses related to the export sales of the U.S. exporter and the IC-DISC. In case of the sale of export property to the IC-DISC, the transfer price would be computed in one of the three following methods, whichever is greater:

  • THE “4-PERCENT” GROSS RECEIPT METHOD
    Under this method the transfer price for a sale by the exporter to the IC-DISC is the price as a result of which the deferred income of the IC-DISC will not exceed the sum of 4% of the qualified export receipts of the IC-DISC and the exporter and 10% of the export promotion expenses of the IC-DISC.
  • THE “50-50” COMBINED TAXABLE INCOME METHOD
    Under this method, the transfer price for a sale by the exporter to the IC-DISC is the price as a result of which the deferred income of the IC-DISC will not exceed the sum of 50% of the combined taxable income of the IC-DISC and the exporter and 10% of export promotion expenses of the IC-DISC.
  • SECTION 482 TRANSFER PRICING METHOD
    The transfer price for a sale by the exporter to the IC-DISC may be determined in a Section 482 Transfer Pricing study.

If the IC-DISC acts as a commission agent for export sales, only the first two methods above apply.

The IC-DISC can perform export promotion activities for which it may be reimbursed 100%. In addition, it may receive a 10% commission for performing these activities based upon the expenses it incurs.

Shareholder(s) of the IC-DISC can be subject to current taxation in the following circumstances:

  • distribution or deemed distribution
  • distribution upon disqualification
  • income attributable to military property
  • disposition of IC-DISC stock.

When qualified export receipts exceed $10,000,000 in a taxable year, the remainder is deemed distributed to the shareholders of the IC-DISC. This IC-DISC can be restructured and used as part of an executive incentive plan.

The IC-DISC owned by the exporter is illustrated below.

The IC-DISC can own the following related foreign export corporations:

  • Foreign International Sales Corporation (FISC) – a foreign corporation, of which the IC-DISC owns more than 50%, that supports services related to any qualified sale, exchange, lease, rental or other disposition of export property by the IC-DISC. (Refer to IC-DISC with FISC below).
  • Real Property Holding Company – a foreign corporation, of which the IC-DISC owns more than 50%, that holds title to real property located outside of the United States that performs the export-related activities of the IC-DISC, i.e. a foreign warehouse to support export activities.
  • Associated Foreign Corporation – a foreign corporation, of which the IC-DISC owns less than 10%, that reasonably furthers transactions leading to qualified export receipts for the IC-DISC.

IC-DISC with Foreign International Sales Corporation (FISC)
The IC-DISC can, as part of meeting its requirements regarding the qualified export asset test, acquire and hold more than 50% of the stock certificates of a related foreign export corporation. In the tax code, one of these related corporations is described as a “Foreign International Sales Corporation (FISC)” that must be located in a jurisdiction outside of the fifty U.S. states and Puerto Rico.

The IC-DISC can form and own a FISC, such as the VIEXCO in the U.S. Virgin Islands. In doing so, a unique opportunity arises to receive the maximum export income deferral available to U.S. exporters. Income generated by this plan is not subject to Subpart F taxation as stated in the IC-DISC regulations. This structure also provides the opportunity for short- and medium-term financing.

Exceeding the annual $10,000,000 qualified export receipts cap will render the remainder of the deferred export income in the combined IC-DISC with FISC as deemed to have been distributed at the close of the year. This IC-DISC with FISC can be restructured and used as part of an executive incentive plan.

The IC-DISC with FISC, exporter-owned, is illustrated below.

 
   
Call 1-800-894-8366 to discuss your needs or
e-mail us your questions
EXPORT TAX BENEFITS
  Contact Us | Site Map | About Export Assist | Export Assist Advantage
Credit & Finance Services | Export Tax Benefits | Education & Training
Resources | Coins | Copyright | Credits