Posted by Jeffrey Feingold on 07.13.22

TPA is asking all privately held clients and trusted advisor partners to take a fresh look at the Interest Charge Domestic International Sales Corporation (“IC-DISC”) tax incentive. Even if you are already using the IC-DISC, TPA may be able to help you increase your savings. The incentive permanently reduces the federal tax rate for owners of privately held companies on certain income. The immediate and permanent tax rate decrease on this income is as high as 17%! (40.8% vs. 23.8%). Achieving this arbitrage does not require any change in business operations whatsoever. The IC-DISC is recommended by the U.S Department of Commerce.

Often dismissed by companies or their advisors if they are not manufacturing products which are directly exported, the IC-DISC applies to a much larger industry footprint. Manufacturers, distributors, engineers, component makers, military contractors, software producers, equipment lessors. The following sets of questions can help determine if the IC-DISC may benefit a privately held company:

Manufacturers, Growers, and Distributors of Products

Does your company make, grow, extract, or produce any products (or distribute or lease products) that are partially or wholly made in the U.S.?

Are some of these products ultimately or temporarily used anywhere outside of the U.S. (including outer space)?

If the answer to both questions is YES, please contact your TPA representative to discuss a free analysis of potential savings from your production and/or distribution of products.

Service Providers

Does your company perform any architectural or engineering services (need not be licensed architects or engineers)?

Are any of these services related to proposed or actual foreign construction projects?

If the answer to both questions is YES, please contact your TPA representative to discuss a free analysis of potential savings from A&E services.

Some examples of overlooked scenarios where the IC-DISC has provided significant tax savings:

• Producer of U.S. made component products sold to U.S. customers but installed abroad.
• Distributors selling partially U.S. made products to foreign customers, or to U.S. customers requesting delivery abroad.
• Software programmed in India but undergoing final review in the U.S. which is licensed to users abroad.
• Satellites finished in the U.S. launched into outer space.
• Growers selling through a cooperative.
• Architects providing plans for a foreign office expansion.

Equipment leased for offshore drilling in international waters.

TPA offers remote or live IC-DISC CPE sessions for our CPA firm partners. Please contact us with any questions related to this valuable government incentive.