June 18, 2015
The government's sea of acronyms is enough to make anyone bored, but there is one acronym worth getting excited about: IC-DISC. IC-DISC stands for Interest Charge-Domestic International Sales Corporation, and it can be an ideal option for growers, manufacturers, or food processors that export overseas.
Never heard of it? Don't worry - you can still reap the benefits. An IC-DISC is a corporation formed in the United States that gives special tax treatment on sales of, or commissions on, qualifying export products. IC-DISCs are not subject to federal tax on export income, which can save businesses substantial amounts of money over time.
This type of corporation has its roots in the early 1970s, when Congress enacted DISC legislation to help encourage the U.S. export trade and shore up the economy by encouraging companies to stay on American soil.
Done correctly, an IC-DISC is a corporation on paper only, making it easy to set up and maintain. And the benefits may be substantial, according to Nate Miller and Jeff Bowman, Grimbleby Coleman CPAs and Partners. "An IC-DISC may reduce your business' federal income tax," according to Miller. "In fact, you may save approximately 8 percent of your net export income."
A properly set up IC-DISC will allow your business to pay commissions to the IC-DISC based on your export income - potentially up to 50 percent. That commission is not taxable and is considered a tax deduction, which can cut your regular taxable income.
With an IC-DISC, you'll then receive cash back in the form of a dividend, which will also be taxed at a reduced rate. In short, you could save money all around.
"Many growers in the Valley export overseas," Miller says. "For those growers, it's important to set up an IC-DISC as soon as possible - unfortunately, the tax benefits are not retroactive, so the savings from the establishment of an IC-DISC come only after the corporation is formed."
You may set up an IC-DISC even if you have an established partnership, S corporation, or LLC; in those cases, the IC-DISC will act as a subsidiary. IC-DISCs are slightly more difficult to set up if your business is a C corporation, but the benefits are still worth the trouble.
To setup an IC-DISC, Jeff Bowman, Ag Team lead, recommends beginning the paperwork in June, so it is completed by the start of the Fall harvest.
Establishing an IC-DISC is best left to a qualified certified public accountant. Our Grimbleby Coleman ag team has extensive experience helping growers and manufacturers save money through IC-DISCs. Please call Jeff Bowman or Nate Miller to learn more.
Clive has, in his words, been with Grimbleby Coleman since dirt and describes his role as president, cheerleader, and bottle washer. That makes sense, since he bought the practice from his father, Roy, in 1982. At the time, he had one employee, Claudia.
Before his entrance into business ownership, Clive received a BS in accounting from CSU Sacramento and an MBA from Golden Gate University, followed by time with Coopers & Lybrand and John Waddell Accountants.
When he's not running the practice, Clive keeps himself actively involved in a number of community organizations. See the list on his resume. It will make you tired!