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For the tax year that ends with or

qualified export receipts on the property,

Form 720, Quarterly Federal Excise

within the IC-DISC’s tax year, at least

derived from the IC-DISC’s sale of the

Tax Return;

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95% of the foreign corporation’s gross

property plus 10% of the IC-DISC’s export

Form 941, Employer’s QUARTERLY

receipts consists of the qualified export

promotion expenses attributable to the

Federal Tax Return; or

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receipts described in items 1 – 4 of

receipts, or

Form 945, Annual Return of Withheld

Qualified export receipts above and

3. Taxable income based on the sale

Federal Income Tax.

interest on the qualified export assets

price actually charged, provided that

The trust fund recovery penalty may

listed in items 3 and 4 of Qualified export

under section 482 the price actually

be imposed on all persons who are

assets on page 3; and

charged clearly reflects the taxable

determined by the IRS to have been

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The adjusted basis of the qualified

income of the IC-DISC and the related

responsible for collecting, accounting for,

export assets in items 1 – 4 of Qualified

person.

and paying over these taxes, and who

export assets that the foreign corporation

acted willfully in not doing so. The penalty

Schedule P (Form 1120-IC-DISC),

held at the end of the tax year is at least

is equal to the unpaid trust fund tax. See

Intercompany Transfer Price or

95% of the adjusted basis of all assets it

the instructions for Form 720 or Pub. 15

Commission, explains the intercompany

held then.

(Circular E), Employer’s Tax Guide, for

pricing rules in more detail.

2. A real property holding company

details, including the definition of

is a related foreign export corporation if:

Section 994(c), Export

responsible persons.

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The IC-DISC directly owns more

Promotion Expenses

Other penalties. Other penalties may be

than 50% of the total voting power of the

imposed for negligence, substantial

foreign corporation’s stock and

These are expenses incurred to help

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understatement of tax, reportable

Its exclusive function is to hold title

distribute or sell export property for use or

transaction understatements, and fraud.

to real property located outside the United

distribution outside the United States.

See sections 6662, 6662A, and 6663.

States for the exclusive use (under lease

These expenses do not include income

or otherwise) of the IC-DISC and

tax, but do include 50% of the cost of

applicable foreign law forbids the IC-DISC

shipping the export property on

Specific Instructions

to hold title to the property.

U.S.-owned and U.S.-operated aircraft or

3. An associated foreign

ships in those cases where U.S. law or

corporation is a related foreign export

regulations do not require that the export

corporation if:

property be shipped on such aircraft or

Period Covered

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The IC-DISC or a controlled group

ships.

Enter the tax year in the space provided

of corporations to which the IC-DISC

Deficits in Earnings and Profits

at the top of the form. For a calendar

belongs owns less than 10% of the total

year, enter the last two digits of the

A deficit in earnings and profits is

voting power of the foreign corporation’s

calendar year in the first entry space. For

chargeable in the following order:

stock (section 1563 defines a controlled

a fiscal or short tax year return, fill in the

group in this sense, and sections 1563(d)

1. First, to any earnings and profits

tax year space at the top of the form.

and (e) define ownership) and

other than accumulated IC-DISC income

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Address

The IC-DISC’s ownership of the

or previously taxed income.

foreign corporation’s stock or securities

2. Second, to any accumulated

Include the suite, room, or other unit

reasonably furthers transactions that lead

IC-DISC income.

number after the street address. If the

to qualified export receipts for the

3. Third, to previously taxed income.

post office does not deliver mail to the

IC-DISC.

street address and the corporation has a

Do not apply any deficit in earnings and

P.O. box, show the box number instead.

profits against accumulated IC-DISC

See Regulations section 1.993-5 for

income that, as a result of the

more information about related foreign

Item C—Employer Identification

corporation’s revoking its election to be

export corporations.

Number (EIN)

treated as an IC-DISC (or other

Gross receipts are the IC-DISC’s total

Enter the corporation’s EIN. If the

disqualification), is deemed distributed to

receipts from selling, leasing, or renting

corporation does not have an EIN, it must

the shareholders. See section

property that the corporation holds for

apply for one. An EIN may be applied for:

995(b)(2)(A).

sale, lease, or rent in the ordinary course

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Online — Click on the EIN link at

of its trade or business and gross income

Penalties

The EIN is

from all other sources. For commissions

issued immediately once the application

on selling, leasing, or renting property,

The IC-DISC may have to pay the

information is validated.

include gross receipts from selling,

following penalties unless it can show that

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By telephone at 1-800-829-4933.

leasing, or renting the property on which

it had reasonable cause for not providing

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By mailing or faxing Form SS-4,

the commissions arose. See Regulations

information or not filing a return.

Application for Employer Identification

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section 1.993-6 for more information.

$100 for each instance of not providing

Number.

required information, up to $25,000 during

Section 994, Intercompany

If the corporation has not received its

the calendar year.

Pricing Rules

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EIN by the time the return is due, enter

$1,000 for not filing a return.

“Applied for” and the date you applied in

If a related person described in section

See section 6686 for other details.

the space for the EIN. For more details,

482 sells export property to the IC-DISC,

If you receive a notice about penalty

see the instructions for Form SS-4.

use the intercompany pricing rules to

and interest after you file Form

figure taxable income for the IC-DISC and

Note. Only corporations located in the

1120-IC-DISC, send us an explanation

the seller. These rules generally do not

United States or U.S. possessions can

and we will determine if you meet

permit the related person to price at a

use the online application. Foreign

reasonable-cause criteria. Do not attach

loss. Under intercompany pricing, the

corporations must use one of the other

an explanation when you file Form

IC-DISC’s taxable income from the sale

methods to apply.

1120-IC-DISC.

(regardless of the price actually charged)

Item E —Total Assets

may not exceed the greatest of:

Trust fund recovery penalty. This

1. 4% of qualified export receipts on

penalty may apply if certain excise,

Enter the IC-DISC’s total assets (as

the IC-DISC’s sale of the property plus

income, social security, and Medicare

determined by the accounting method

10% of the IC-DISC’s export promotion

taxes that must be collected or withheld

regularly used in keeping the IC-DISC’s

expenses attributable to the receipts,

are not collected or withheld, or these

books and records) at the end of the tax

2. 50% of the IC-DISC’s and the

taxes are not paid. These taxes are

year. If there are no assets at the end of

seller’s combined taxable income from

generally reported on:

the tax year, enter -0-.

-4-

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

Instructions For Form 1120-Ic Disc - Interest Charge Domestic International Sales Corporation Return - 2011 Page 4

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