Could you benefit from establishing an IC-DISC? These are the qualifiers:
Manufacturing companies that could qualify for the IC-DISC incentive include businesses that manufacture and export their own goods, as well as companies that manufacture a good that is part of or included in a product that is exported by others – and this is where many businesses miss out!
The IC DISC may be used by your company and its affiliates to facilitate the sale of equipment that is manufactured in the U.S. and sold outside the U.S. Property is considered to be “sold outside the U.S.” as long as the ultimate destination of the property is a foreign location. The ultimate destination test is met if property is sold to a customer in the U.S. but the property is shipped to a foreign destination by that customer within one year. In addition, engineering services performed in the U.S. can qualify for treatment as an export sale for this purpose if the benefit of such services are realized outside the U.S.
To qualify for an IC-DISC, exporters need to meet a number of IRS criteria, including being incorporated in one of the 50 states or District of Columbia, and verifying that at least 95% of its gross receipts during the tax year are qualified export receipts. Manufacturers who qualify for an IC-DISC can realize more than 15% permanent tax savings, resulting in increased positive cash flow. Other benefits include ways to develop management incentives (naming select personnel as shareholders) and succession or estate planning.
Clark Schaefer Hackett advisors can review your company and its products to see if you qualify for the benefits of an IC-DISC.
For a more in-depth look at this topic, see The ABCs of an IC-DISC, a CSH lite paper.
Further resources for understanding IC-DISC: