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How long will IC-DISC Tax Benefits Last?

March 14, 2013

Many people are wondering; will the IC-DISC tax incentives survive calls for proposed tax reform circulating in Washington?

I recently wrote about the benefits of implementing an IC-DISC strategy for US manufacturers who are exporting. After reviewing the strategy with various companies who are not familiar with IC-DISCs, one of the initial reactions was, “How long will this last? Will it survive calls for proposed tax reform circulating in Washington?”

To put this in context, some variation of the DISC rules, which is a tax incentive aimed at exporters baked into the tax code, has been on the books since the mid-1970s. While I don’t profess to have a crystal ball that is any better than the next guy’s, given the Obama administration’s current emphasis on increasing exports, I think these rules will continue to be around for a while.

In March 2010, President Obama created an advisory council of industry executives and established a goal of doubling US exports to about $3.14 trillion by the end of 2014 from $1.57 trillion in 2009. The aim of this policy is to increase America’s role as a manufacturing center and support about 2 million additional jobs.

On March 12th published an article titled “Obama Says U.S. Well on Way to Goal of Doubling Exports by 2014”, reporting that the President intends to achieve this goal in large measure by pressing ahead with new trade agreements with Asia and Europe and gaining congressional approval on accords with South Korea, Columbia, and Panama (which were actually negotiated during the Bush administration).

The export council reported that the US was just under 50% toward reaching their 2014 goal, with gains last year coming from agriculture, manufacturing, and high-technology. As the President noted in the Bloomberg article, the gains are not limited to large corporations. Small businesses are benefiting as well.

Later this year, the President will be meeting with leaders of Asian nations to push for a broad agreement on trade. In addition, the US and European Union are in trade talks to expand our economic relationship. Those talks are targeted to be complete within two years.

These efforts, although welcome, solely on their own will not help the US to meet its export goals by 2014. Trade pacts take a long time to negotiate and get approved by Congress. There are also plenty of other headwinds facing exporters in our still weak economy. Nevertheless, this focus on the country’s export trade and manufacturing base can only bode well in the long term and lead me to believe that tax incentives for exporters will be around for a while longer.

For more information on how your company might benefit from an IC-DISC, contact Paul Oliveira, CPA or complete the form below and one of our International Tax Advisors will contact you.

Read Paul’s previous blog titled “Reduce Federal Income Taxes on Export Profits with IC-DISC”.

KLR is a premier provider of international tax services to middle market companies and works with both foreign-based companies moving to the U.S. market as well as domestic companies that do business around the world. The KLR International Tax group is available to assist clients with any tax issues pertaining to either inbound or outbound tax issues, both from a corporate perspective as well as for multinational families. Those issues may include the IRS’ Voluntary Disclosure Program, planning for intellectual property transfers, transfer pricing, export incentives, and global restructuring projects.

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