Interest Charge - Domestic International Sales Corporation
The IC-DISC is the last remaining export incentive for privately held companies based in the USA. An IC-DISC allows a company the opportunity to convert ordinary income into capital gains, allowing these profits to be taxed at a much lower rate. If the USA company has a foreign parent, the tax savings from utilizing this mechanism can be substantial.
The IC-DISC practice of ABGi is comprised of professionals with decades of experience with the complicated computations. Using transaction by transaction analysis, and product groupings, every client’s valuable IC-DISC benefits are fully optimized.
If a company has foreign ownership, the implementation of an IC-DISC within the corporate hierarchy, is the perfect alternative to expensive and exotic schemes designed to strip out US earnings that have consistently drawn scrutiny from the IRS.
Looking back to the open years is a simple process. Gathering the data and redetermining the commission expense could result in a significant cash benefit to the shareholders. Our team works closely with the incumbent service providers to assist with amending all the required returns, and accurately reflecting the revised commissions, dividends, or producer loans on these returns.
Our unique services include the following:
- Evaluation of qualification for IC-DISC benefits;
- Structuring advice, IC-DISC election, and related-party sales and commission agreements;
- Technology-driven calculations that optimize tax benefits in current and prior years;
- Preparation of IRS Form 1120-IC-DISC and all related schedules; and
- Representation in IRS audits.
Here is a sampling of success stories utilizing ABGi’s unique approach:
- ABGi captured a $2 million cash tax benefit for a closely held exporter of logs and lumber. This project required a comprehensive review of the prior tax filings and a recalculation of commission deductions. A significant portion of the benefit was achieved by grouping related products. The deficiency distribution approach was utilized to maintain the IC-DISC qualification. In addition, ABGi reviewed the existing producer’s loans and advised regarding additional deferral opportunities.
- A closely held defense contractor engaged ABGi to optimize their IC-DISC benefit. This project required an extensive review of qualified export sales and a technology driven calculation of commission calculations. As a result of our approach, $4 million in additional benefit was achieved.
- A US based manufacturer of heat exchangers was owned by a foreign parent based in Norway. Utilizing ABGi’s proprietary approach, all of the profits from US operations were converted into dividends to the foreign parent, resulting in minimal taxable income for the US operation.
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