IC-DISC: a Way to Reduce Income Tax for Exporters

We partnered with our members MANTEC and Stambaugh Ness for a webinar presentation on "Tax Benefits for Companies that Export Goods and Services" , which was offered on January 27 and is available for anyone interested at the Stambaugh Ness website.  Follow this link and you can listen to the entire webinar at your convenience.

Jolleen E. Biesecker, Stambaugh Ness' Tax Director, provided a great overview of the tax device called the Interest Charge Domestic International Sales Corporation, or IC-DISC. The IC-DISC allows exporters of goods and services to defer income tax from profits on export sales and potentially pay qualified dividends to owners at a 15% tax rate.

There have been other tax devices in the past, which have been challenged by the World Trade Organization and subsequently repealed, but the IC-DISC remains a valid alternative. 

Some of you may remember that in 1984 the DISC, or Domestic International Sales Corporation, was challenged as an illegal export subsidy and repealed.  The DISC was replaced with the Foreign Sales Corporation, or FSC, which also allowed a partial tax exemption for exporters.  In 1999, the World Trade Organization ruled that the FSC also constituted and illegal export subsidy, and thus it too was repealed.  In 2000, the "extraterritorial income exclusion", or EIE, was instituted, which again provided tax benefits for exporters, but the American Jobs Creation Act of 2004 dealt a significant blow to U.S. exporters by phasing out the EIE.  Prior to the phase-out of the EIE, the IC-DISC received scant attention in the business world. But it's once again in the spotlight as a useful tool.

Legal Issues Overview Starts 2011 Seminar Series

We were off to a great start in 2011 with our first program focusing on legal issues of exporting. 

WTC member Louis Dejoie,  Chair of the International Law Practice Group with McNees, Wallace and Nurick LLC presented the executive overview.  Here is a summary of key topics:

  

§     EXPORT SALE BASICS

  - legal framework of sales contracts

  - INCOTERMs

§     USE OF FOREIGN INTERMEDIARIES

  -  issues to consider regarding intermediary relationships, including those of agents, distributors and employees stationed in a foreign country  such as labor laws, termination laws, registration and antitrust laws

  - due diligence when choosing an intermediary 

  - Know Your Partner!!!

§     IP PROTECTION

  - patents, trademarks and copyright issues

§     COMPLIANCE PROGRAMS

  -  Importance of having formal written policies and procedures

  -  Appoint an Export Compliance Officer

  - EAR, ITAC and OFAC