INTEREST CHARGE DOMESTIC INTERNATIONAL SALES
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 firstname.lastname@example.org. There is no cost or obligation
and all information is confidential.
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
- 95% Qualified Gross Receipts Test
- sales of certain qualified export property
- interest on any obligation that is a qualified
- 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
one of the three
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
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
Under this method, the transfer
price for a sale by the exporter
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
The transfer price for
a sale by the exporter
to the IC-DISC
in a Section
482 Transfer Pricing
If the IC-DISC acts as a commission
agent for export sales, only the first
The IC-DISC can perform export
promotion activities for which it may be reimbursed
100%. In addition,
based upon the expenses it incurs.
Shareholder(s) of the IC-DISC
can be subject to current taxation in the
- distribution or deemed distribution
- distribution upon disqualification
- income attributable to military property
- disposition of IC-DISC stock.
export receipts exceed $10,000,000 in a taxable year, the remainder
deemed distributed to the shareholders of the IC-DISC.
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,
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
located outside of the United States that performs the export-related
activities of the IC-DISC, i.e. a foreign warehouse to support
Associated Foreign Corporation – a foreign corporation,
of which the IC-DISC owns less than 10%, that reasonably furthers
leading to qualified export receipts for the 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
Exceeding the annual $10,000,000
qualified export receipts cap will render the remainder of the deferred
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.