One reason that so many companies do not pursue the IC-DISC benefit is because these companies do not believe its products fall under the category of “qualified”. Many are under the impression that this benefit is reserved strictly for manufacturers, and other industries are not eligible to take advantage of IC-DISC export savings. Thankfully, this is simply not true. In fact, the IC-DISC is designed to benefit a much larger range of industries than most are aware of.
An important element to note when contemplating an IC-DISC is that the industry is not being qualified, but the products and services are instead. The Internal Revenue Code §993 and associated regulations governing IC-DISC export property concentrate on qualifying each individual product through a number of tests and requirements. Specifically, the code and regulations state that the product in question must be “manufactured, produced, grown or extracted…” (“MPGE”) in the United States.† This statement alone opens the door to several businesses which believe the IC-DISC is not a viable option. Examples of industries that can benefit from an IC-DISC are farmers, vineyards, miners, cosmetics and textiles, lumber, fisheries, and food industries, just to name a few.
Another industry that may export qualifying products is the software industry. While these companies may not consider its products to fit the definition of MPGE, the regulations address intangible property, which requires that the development take place in the United States and subsequently be utilized outside of the United States.
Even industries not exporting physical products can utilize the IC-DISC. Architectural and engineering services are also covered in the IC-DISC regulations, §1.993-1(h), as qualified export property. If these services are provided for a foreign construction project, revenue from the services can be utilized for IC-DISC savings. Additionally, the services can be conducted within or outside of the United States.
Distributors can utilize the IC-DISC for exported products as well. In the case of distributors, the products being exported must have been produced in the United States in order to qualify for the IC-DISC benefit.
The IC-DISC is a benefit intended for a wide variety of U.S. exporters, and not just manufacturers. Keep in mind that there are other stipulations that define qualified products besides originating in the United States. Understanding that the scope of qualifying products is not limited to manufacturers should encourage companies to begin exploring IC-DISC as an option.