Tax Incentive Strategy for U.S. Exporters: Interest-Charge DISC Alabama International Trade Center Dec 11: Birmingham Business Alliance Dec 18: Mobile Area Chamber of Commerce Edward K. Dwyer, CPA & Alex McGowin , CPA.
Tax Incentive Strategy for U.S. Exporters: Interest-Charge DISCAlabama International Trade Center Dec 11: Birmingham Business Alliance Dec 18: Mobile Area Chamber of CommerceEdward K. Dwyer, CPA & Alex McGowin, CPA
Mail: P. O. Box 3057 Daphne, AL 36526Office Address: Stonebrook Business Park23210 US Hwy 98- Ste A-2Fairhope, AL 36532Phone: (251) 401-4010 E-mail: [email protected]: (251) 232-7115 E-mail: [email protected]
Edward K. Dwyer
1. Qualified Dividends Distributed:
3. OR--May Do Some Of Both
With No IC-DISC: Taxable: $500,000 Marginal taxrate: 39.6% Shareholdertax:$198,000
w/ IC-DISC: 158,500
Effective Rate Reduction: 7.9%
Tax Savings (7.9/39.6): 20%
50% of Profit $ 250,000
Shareholder tax: $ 59,500
50% of Profit $ 250,000
S Corp. s/h’s: 39.6%
Shareholder tax: $99,000
Effective Rate: 31.7%
(158,500/500,000)EXAMPLE: $5 Million Export Sales w/ 10% Net-to-Gross Profit (2013)***
*** Subject to top 23.8% dividend rate (includes Medicare Tax of 3.8%.)
-- sale, lease or rental
-- for direct use, consumption or disposition outside the United S States,
-- 4% of gross receipts may not exceed 100% of CTI, and
-- Sec. 482 method is only elected if the IC-DISC has full substance.
* +10% of certain “export promotion expenses” incurred by the IC-DISC itself.
The “Related Supplier”
Not a Taxpayer
P/S or S Corp.
S/H’s taxed on
* With C corp. as IC-DISC S/H, only deferral is possible (deduction & eventual dividend are presumed to be at the same corporate rate). But S Corp. or P/S—w/ individuals as owner(s)-- creates permanent savings due to rate differential on qualified dividend *** portion of flows .
**In no case may the 4% of gross receipts method result in a profit to the DISC greater than 100% of the CTI from the transaction.
*** Maximum rate only applies to families with over $450,000 of income.
--50% of freight on US flagged vessels
--Commissions paid to unrelated persons on export sales
--Other expenses that advance the distribution or sale of export property for use, consumption, or distribution outside of the United States.
-- It is virtually impossible NOT to meet this definition. It is met whenever the 50% CTI method is applied and marginal costing yields a higher result.
Ed Dwyer & Alex McGowinMail: P. O. Box 3057 Daphne, AL 36526Office Address: Stonebrook Business Park23210 US Hwy 98- Ste A-2Fairhope, AL 36532Phone: (251) 401-4010 E-mail: [email protected]: (251) 232-7115 E-mail: [email protected]
Alabama International Trade Center800-747-2482