IC-DISC Formation & Optimization

INTEREST CHARGE DOMESTIC INTERNATIONAL SALES CORPORATION (IC-DISC)

The tax cuts of 2001 has revitalized the Interest Charge Domestic International Sales Corporation (IC- DISC) for closely held C Corporations and pass through entities: such as, S Corporations, LLCs, and partnerships. The IC-DISC has been a long standing United States (US)export incentive in some form or fashion since 1971, but it was not until the Bush tax cuts reduced the qualified dividend rate to a maximum rate of 15% that the IC-DISC has been really utilized.

US exporters and their shareholder(s) can potentially achieve a 20% permanent tax savings by establishing an IC-DISC for their products that are being exported outside of the US and its territories.
The operation of an IC-DISC can be summarized in the following manner:

  • US Exporter establishes an IC-DISC, the IC-DISC is owned by the US Exporter.
  • The IC-DISC receives a deductible commission from the US Exporter (35% deduction).
  • The commission received by the IC-DISC is dividend back to the US Exporter at the end of each tax year. The dividend flows to the shareholder(s) as a qualified dividend taxed at 15%.
  • Shareholder(s) receives a 20% permanent tax savings (35% – 15% = 20%) permanent tax savings.

In order for shipments to qualify for IC-DISC benefits, exported items need to be manufactured, produced, extracted or grown here in the US.

Cost Segregation Studies

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  • Cost Segregation Studies

A building’s structural assets have longer depreciable lives than its non-structural components. A cost segregation study helps the taxpayer reclassify and identify exactly which assets qualify for shorter depreciation.
Some non-structural components include:

  • Removable floor and wall coverings
  • Decorative millwork
  • Furniture and appliances
  • Land improvements such as parking lots, sidewalks, and landscaping.
  • HVAC systems to support computer equipment and cool foodstuff.
  • Process-related plumbing or electrical work
  • Signage and other decor items

Using the same cost estimation software used by architects and contractors, we can perform cost segregations without historical construction cost documents. Moreover, since bonus depreciation is applicable to assets with tax lives of less than 20 years, there is an added incentive to have a cost segregation study performed on new construction or remodeling projects.

Sales & Use Tax Services

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  • Sales & Use Tax Services

Sales and Use tax is probably the most overlook area of all the Taxes Corporations face in a given year. It is also one of the most expensive, adding anywhere from 5% to 10% or higher with local taxes included to the purchase of taxable items. A lot of times taxable and nontaxable items are included in a single purchase and tax is paid on all items. It is important to have in place certain procedures to ensure tax is only paid on taxable items. PTC can help in setting up these procedures as well as look at your use tax situation. PTC offers full sales and use tax services that include:

  • Sales and use tax audit representation
  • Tax refunds and accounts payable reviews
  • Voluntary disclosure and amnesty programs
  • Managed compliance and single rate agreements
  • Statistical sampling analysis

Let PTC be your state and local trusted tax advisor.