LUTZ BUSINESS INSIGHTS
What are IC-DISCs?
JIM HONZ, LUTZ TAX PARTNER
An IC-DISC is a separate corporate entity that’s set up solely to receive tax benefits on exported goods. If you export significant goods, products, or even services such as architecture & engineering, you should create a DISC to begin receiving export tax benefits.
There are several export tax benefits available to U.S. exporters, and Lutz is experienced in helping companies set up IC-DISCs and earn the following:
Lower Tax Rates on Qualified Dividend Income
As most qualified dividend income is already taxed at a lower rate than regular income, the IC-DISC offers a lower tax rate on the same dividend being paid out. It creates permanent tax savings of 10% or higher of the net export income for both U.S. exporters and their shareholders.
You can choose to leave some of the export income within the IC-DISC, which will further delay taxation. This process is similar to a “last in, first out” (LIFO) inventory benefit.
Outside of the monetary benefits of an IC-DISC, companies that set this up will also not need to worry about the following:
- No Additional Employees Needed: An IC-DISC is a “paper” company, so there are no employees required.
- No Additional Operating Costs: With no employees, your company will only require a shift in behind-the-scenes accounting work. Additionally, to comply with IRS regulations on IC-DISCs, you need to ensure that the IC-DISC was filed correctly and is being maintained, that the export property qualifies, that DISC commissions are properly calculated, and that no errors are found on the 1120 IC-DISC return.
- It’s Out of Sight: As IC-DISCs require little more than behind-the-scenes monitoring, they stay out of sight of employees, shareholders, and customers. This helps keep operations running smoothly, as nothing changes on the surface of your company when you create the IC-DISC.
Companies anywhere in the country can apply, so don’t let your location deter you from receiving more from your exported goods.
ABOUT THE AUTHOR
JIM HONZ + TAX SHAREHOLDER
Jim Honz joined the firm in 1984 and currently serves as a Tax Shareholder. His areas of expertise include export tax incentives (IC-DISCs), choice of business entity, and methods of accounting (including Lifo Inventory). In addition, Jim works with tax-exempt organizations on tax and organizational issues.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- Silver Medal on CPA Exam for second highest score
- BSBA in Accounting, Creighton University, Omaha, NE
- Catholic Charities, Past Board Member/President
- Nebraska Organ Recovery System, Inc., Board Member/Treasurer
- Creighton University Financial Advisory Committee, Past Alumni Member Appointed by CU President
- St. Wenceslaus Church, Elected Parish Council Member (Vice President), Chairman of Finance Committee
- Creighton University Accounting Department, Past Advisory Board Member
- SIDs 398 (Pacific Springs) & 189 (Georgetown), Elected Trustee/Chairman
- NSCPA, Political Education Committee Member
- Tax Cuts & Jobs Act + Ag Industry
- 2019 Manufacturing Outlook Survey Results
- How Would a Robotics Tax Affect Manufacturing Businesses?
- Additive Manufacturing Has Many Tax and Accounting Implications
- 2018 Manufacturing Outlook Survey Results
- Reformation of Valuation Discounts
- 2017 Manufacturing Outlook and Insights
- What are IC-DICS?
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