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The Last of the Export Incentives

June 25, 2014

Contributed by alliantgroup

How U.S. Businesses Can Benefit From an IC-DISC

For companies looking to reinvest in their businesses, take a second look at your exports. Thanks to one overlooked export tax incentive, they may be more valuable than you realize.

In the past, we have seen firsthand how the creation of an Interest-Charge Domestic International Sales Corporation (IC-DISC) has allowed U.S. businesses from a number of industries to greatly reduce the amount of tax paid on their exports. Through use of an IC-DISC entity, companies that export their products or projects can amass significant tax savings.

How it Works

Under this tax strategy, the exporter pays commissions to the IC-DISC. The commissions are deductible to the exporter, and the deemed or actual dividend payment of the commission income in the IC-DISC is taxed to the exporter’s shareholders or partners at a favorable 20% rate. Thus, on one hand, the exporter receives a deduction of 39.6% on the commission payments made to the IC-DISC and on the other hand, pays only a 20% tax rate on the income repatriated from the IC-DISC.

The bottom line is a permanent tax savings for U.S. exporters and shareholders of nearly 10% of net export income.

Who Qualifies

Exporters that are good candidates for the IC-DISC include, but are not limited to, the following:

  • U.S. companies that directly export their products
  • U.S. companies that sell products that are destined for use overseas
  • Architectural and engineering firms who work on projects that will be constructed abroad (even though the work is performed in the United States)
  • Software companies that export their products
  • Pass-through entities and privately held corporations

Why Now

The benefit available with the IC-DISC can be tremendous, and with Congress recently extending the tax rates that make this benefit possible, there has never been a better time for U.S. exporters to look at this valuable incentive.

With its future secure and the potential for valuable tax savings, companies would be wise to explore the possibility of an IC-DISC tax strategy.

alliantgroup's mission is one of education and awareness – we exist to help industry organizations, U.S. businesses and the CPA firms that advise them take full advantage of all federal and state tax credits, incentives and deductions available to them – our government has legislated these powerful incentive programs to help businesses grow and successfully compete both in the U.S. and abroad. We are proud to have helped over 15,000 businesses claim more than $3 billion in tax incentives!  alliantgroup’s headquarters is in Houston, Texas, with offices across the country including New York, Boston, Chicago, Orange County, Sacramento, Orlando, Indianapolis and Washington, DC.

 

Advisors | Auditors | Consultants | CPAs - Blum Shapiro is one of the premier public accounting firms in the northeast and a Top 100 CPA Firm in the U.S. Our professionals serve businesses, individuals and organizations in Boston (MA), Hartford (CT), Cranston (RI), Shelton (CT) ,Quincy (MA) and Newton (MA) with audit, tax and business consulting services. Our firm has developed practice areas in automotive, construction, education, government, healthcare, hospitality, manufacturing, nonprofit organizations and professional service firms. New Haven CT, Fairfield CT, Norwalk CT, Waterbury CT.