If your business sells goods and/or services outside the U.S., you may be able to reduce your federal tax liability in more than half through the use of an interest charge-domestic international sales corporation (IC-DISC). This may be the case even if export sales represent a fraction of your company’s overall sales.
Sound too good to be true?
The IC-DISC is not an exotic strategy designed to “game” the system; it expressly sanctioned by Congress as means of promoting export sales of U.S. goods and services. IC-DISCs were actually introduced back in 1971 and were originally intended to be a tax deferral mechanism. They were used — as my old tax professor used to say, “a tax deferred is money in your pocket” — but never quite caught on. That all change in 2004 when amendments to the Internal Revenue Code caused dividends from qualified corporations, including IC-DISCs, to be taxed at capital gains rates of 15%. Informed exporters stampeded to take advantage of IC-DISCs, which allowed taxation of export profits to be permanently reduced from an effective rate of approximately 35% to the reduced capital gains rate for qualifying dividends.
While government statistics show that IC-DISCs remain underutilized, informed exporters continue to take advantage of the arbitrage tax savings of 20% offered by the structure; if your company is eligible, you should as well.
Candidates for an IC-DISC
- Manufacturers or distributers of products manufactured, produced, grown or extracted in the U.S. that sell or lease such products outside the […]
Before beginning a career in international trade, I did not ever stop to think that the t-shirt I was wearing or dishes I was using were likely made elsewhere, and went through a long complicated logistics supply chain in order to reach my local store. Little did I know that when anything goes wrong in that complicated supply chain, it would be my job to help. Recently, a client had over 2.5 million dollars worth of electronic merchandise on hold by U.S. Customs and Border Protection (Customs) for alleged intellectual property rights violations. In plain English, Customs was under the impression my client was trying to import goods with trademarks or logos they did not have the authorization to import.
When you see the symbols below, make sure you think about LICENSES to use them!!
For this client, this was a lot of money at stake, and it could have put them out of business if we did not come up with a quick solution. Instead of thinking of the band aid type solution, to solely fix this issue, we came up with a compliance plan for the client to use going forward, that would also help solve the current issue.
The compliance plan involved both a short term and long term solution. In the short term, the goal was to have the 2.5 million dollars worth of merchandise released ASAP. To accomplish this goal, […]