Finally, a DISC Exporters can benefit from

 

It is my pleasure to welcome a new Fluent In Foreign contributor – Benjamin Snipes, Partner at the Flott & Co. a Washington, D.C. based law firm.  Mr. Snipes is an international tax expert whose practice includes helping U.S. exporters navigate treacherous international taxation issues.  In his first appearance as our contributor, Mr. Snipes addresses  U.S. government sponsored tax benefits available for U.S. exporters to defer and reduce US taxes on their export related income by forming an IC-DISC.  The article further discusses ways to maximize the gains available through proper legal structuring and accounting of export transactions through the IC-DISC.    www.FluentInForeign.com

re: IC-DISCs

By: Benjamin Snipes,  Partner, Flott & Co.

Congress first created Domestic International Sales Corporations (DISCs) in 1971 as special purpose companies that allow US exporting companies to legally defer and reduce taxes on export related income. Congress created DISCs to advance the public policy goals of promoting economic growth and creating tax parity with foreign exporters that receive a border tax benefit. A U.S. income tax regime referred to as “IC-DISCs” is the current result that the US government makes available to exporters for up to $10,000,000 in “qualified export receipts.”

An IC-DISC modifies the DISC structure by levying a small interest charge on the deferred income held within the IC-DISC. The most recent statistics published by the IRS in 2008 shows that out of the approximately 1,917 IC-DISCs, 86.1% of them were majority-owned by individuals, partnerships, trusts, estates, or S corporations; 11.7% were majority-owned by other corporations; and the remaining 2.2% reported no majority owner. http://www.irs.gov/pub/irs-soi/11cosumbulinterestcharge.pdf. In 2008, IC-DISCs reported $4.7B in qualified and non-qualified receipts, with $4.5B in deferred taxable income.[1]

US exporters benefit from IC-DISCs primarily in two ways: (1) by allowing indefinite deferral of taxation on qualified US export receipts subject to the interest charge, and (2) by allowing companies to both deduct payments to IC-DISCs and allowing that income be distributed to common shareholders of the exporting company and IC-DISC at the 15% qualified dividend rate. The second IC-DISC benefit effectively bypasses corporate level taxation on the IC-DISC income and allows for a single level of taxation at preferred individual dividend rates in the hands of individual shareholders. While the qualified dividend benefit may be reduced or eliminated with tax reform, the removal of the corporate level of taxation on the IC-DISC still creates a large benefit.

To read article in its entirety, please visit our new Exporter’s Tax Corner page  http://wp.me/P1iIhX-6Q  

http://www.FluentInForeign.com

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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