If you export a U.S. made product, then you ought to consider forming an Interest Charge Domestic International Sales Corporation (IC-DISC) in order to maximize profits. An IC-DISC is corporation that elects to be taxed in a unique fashion. Actually, the corporation’s income is not taxed. The earnings generated by the ID-DISC are taxed after they have been distributed to its shareholders. The shareholder can expect to pay a tax rate of 20%-23.8%, instead of the ordinary tax rate hovering between 39.6%- 43.4%. Huge savings indeed!
An IC-DISC is available to manufacturers, exporters of goods, and even exporters of services, exempli gratis engineering, or architectural services. In order to qualify the company must present receipts for selling, exchanging or otherwise disposing of export property; leasing or renting property outside the United States; supporting service related to sale, exchange, lease, or rental property outside the U.S. Moreover, in order for the items to comply with the definition of “export property” it must be: made, grown, or extracted in the United States; held for sale, lease, or rent in the ordinary course of a trade or business outside the United States; no more than 50% of its fair market value can be contributed to articles imported into the United Sates.
Please consult Li, Friezen & Grossetta, CPAs, PC if your business is a U.S. based exporter. If you own a large company, you can register a separate IC-DISC corporation operating as a subsidiary business of the one you already own. As mentioned above, the potential savings are immense. It would bring us great joy to help your company qualify for IC-DISC benefits, and assist in structuring operations to prepare for this lucrative tax benefit.