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Note. “United States,” as used in the

IC-DISC should not use the cash method

8. Certain obligations held by the

of accounting because that method

following instructions, includes Puerto

IC-DISC that were issued by a domestic

materially distorts its income.

Rico and U.S. possessions, as well as the

corporation organized to finance export

50 states and the District of Columbia.

property sales under an agreement with

Change in accounting method. To

the Export-Import Bank under which the

change its method of accounting used to

Section 993

domestic corporation makes export loans

report taxable income, for income as a

that the Export-Import Bank guarantees.

Qualified export receipts are any of the

whole or for the treatment of any material

9. Amounts (other than reasonable

item, the IC-DISC must file Form 3115,

following.

working capital) on deposit in the United

Application for Change in Accounting

1. Gross receipts from selling,

States used to acquire qualified export

Method.

exchanging, or otherwise disposing of

assets within the time provided by

export property.

See Form 3115 and Pub. 538,

Regulations section 1.993-2(j).

Accounting Periods and Methods, for

2. Gross receipts from leasing or

more information on accounting methods.

renting export property that the lessee

See Regulations section 1.993-2 for

uses outside the United States.

more information.

Accounting Periods

3. Gross receipts from supporting

Export property must be:

services related to any qualified sale,

An IC-DISC must figure its taxable

1. Made, grown, or extracted in the

exchange, lease, rental, or other

income on the basis of a tax year. A tax

United States by a person other than an

disposition of export property by the

year is the annual accounting period an

IC-DISC;

IC-DISC.

IC-DISC uses to keep its records and

2. Neither excluded under section

4. Gross receipts from selling,

report its income and expenses.

993(c)(2) nor declared in short supply

exchanging, or otherwise disposing of

Generally, IC-DISCs may use a calendar

under section 993(c)(3);

qualified export assets that are not export

year or a fiscal year.

3. Held mainly for sale, lease, or rent

property, but only if there is a recognized

Note. The tax year of an IC-DISC must

in the ordinary course of a trade or

gain.

be the same as the tax year of the

business, by or to an IC-DISC for direct

5. Dividends (or amounts includible in

principal shareholder which, at the

use, consumption, or disposition outside

gross income under section 951) with

beginning of the IC-DISC tax year, has

the United States;

respect to stock of a related foreign

the highest percentage of voting power. If

4. Property not more than 50% of the

export corporation (defined below).

two or more shareholders have the

fair market value of which is attributable

6. Interest on any obligation that is a

highest percentage of voting power, the

to articles imported into the United States;

qualified export asset.

IC-DISC must have a tax year that

and

7. Gross receipts for engineering or

conforms to the tax year of any such

5. Neither sold nor leased by or to

architectural services for construction

shareholder. See section 441(h).

another IC-DISC that, immediately before

projects outside the United States.

or after the transaction, either belongs to

See Pub. 538 for more information on

8. Gross receipts for the performance

the same controlled group (defined in

accounting periods and tax years.

of managerial services in furtherance of

section 993(a)(3)) as your IC-DISC or is

the production of other qualified export

related to your IC-DISC in a way that

Rounding Off To Whole

receipts of an IC-DISC.

would result in losses being denied under

Dollars

section 267.

For more information, see Regulations

The IC-DISC may round off cents to

section 1.993-1.

See Regulations section 1.993-3 for

whole dollars on its return and schedules.

details.

Qualified export assets are any of

If the IC-DISC does round to whole

A producer’s loan must meet all the

the following.

dollars, it must round all amounts. To

following terms.

round, drop amounts under 50 cents and

1. Export property (see below).

increase amounts from 50 to 99 cents to

1. Satisfy the requirements of sections

2. Assets used primarily in connection

the next dollar (for example, $1.39

993(d)(2) and (3).

with the sale, lease, rental, storage,

becomes $1 and $2.50 becomes $3).

2. Not raise the unpaid balance due

handling, transportation, packaging,

the IC-DISC on all of its producer’s loans

assembly, or servicing of export property,

If two or more amounts must be added

above the level of accumulated IC-DISC

or the performance of engineering or

to figure the amount to enter on a line,

income it had at the start of the month in

architectural services described in item 7

include cents when adding the amounts

which it made the loan.

of Qualified export receipts above or

and round off only the total.

3. Be evidenced by a note, or other

managerial services in furtherance of the

Recordkeeping

written evidence of indebtedness, with a

production of qualified export receipts

stated maturity date no more than 5 years

described in items 1, 2, 3, and 7 above.

Keep the IC-DISC’s records for as long as

after the date of the loan.

3. Accounts receivable produced by

they may be needed for the

4. Be made to a person engaged in a

transactions listed under Qualified export

administration of any provision of the

U.S. trade or business of making,

receipts, items 1 – 4, 7, or 8 above.

Internal Revenue Code. Usually, records

growing, or extracting export property.

4. Temporary investments, such as

that support an item of income, deduction,

5. Be designated as a producer’s loan

money and bank deposits, in an amount

or credit on the return must be kept for 3

when made.

reasonable to meet the IC-DISC’s needs

years from the date the return is due or

for working capital.

filed, whichever is later. Keep records that

For more information, see Schedule Q

5. Obligations related to a producer’s

verify the IC-DISC’s basis in property for

(Form 1120-IC-DISC), Borrower’s

loan.

as long as they are needed to figure the

Certificate of Compliance With the Rules

6. Stock or securities of a related

basis of the original or replacement

for Producer’s Loans, and Regulations

foreign export corporation (defined

property.

section 1.993-4.

below).

The IC-DISC should keep copies of all

A related foreign export corporation

7. Certain obligations that are issued

filed returns. They help in preparing future

includes the following.

or insured by the U.S. Export-Import Bank

and amended returns and in the

or the Foreign Credit Insurance

1. A foreign international sales

calculation of earnings and profits.

Association and that the IC-DISC

corporation is a related foreign export

acquires from such Bank or Association

corporation if:

Definitions

•

or from the person who sold or bought the

The IC-DISC directly owns more

The following definitions are based on

goods or services from which the

than 50% of the total voting power of the

sections 993 and 994.

obligations arose.

foreign corporation’s stock;

-3-

Instructions for Form 1120-IC-DISC (Rev. 12-2011)

Instructions For Form 1120-Ic Disc - Interest Charge Domestic International Sales Corporation Return - 2011 Page 3

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