IC-DISCINTEREST CHARGE-DOMESTIC

INTERNATIONAL SALES CORPORATION

TAX BENEFIT SERIES PRESENTING

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.

MANUFACTURING AND THE IC-DISC

Who would benefit?

Companies who export U.S. produced goods

Companies who receive in the U.S. and exportproducts with more than 50% of US Components

Main benefit

Have export sales taxed at the more favorablequalified dividend tax rate.

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.

WHAT IS AN IC-DISC ?

An Interest Charge - Domestic International Sales Corporation("IC-DISC") is:

A separate legal entity (C Corporation) A document company (no need for operating structure) Non-taxable entity (federal income tax and some states) A commission agent for your company.

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.

MECHANICS

A commission is paid by the operating company to the IC-DISC (inter-company pricing rules)

Ordinary deduction on the operating company = up to 40.5% tax savings

The IC-DISC entity may pay Qualified Dividend to its shareholders= max.23.8% (qualified dividend tax rate for highest tax bracket taxpayers).

Net result is up to 16.7% tax savings.

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.

WITHOUT AN IC-DISC WITH AN IC-DISC

Net Income $5,000,000Tax rate(Highest Rate) 40.5%Tax Due (A) $2,025,000

Net Income 5,000,000Commissions (2,500,000)Net Income After Commissions $2,500,000Tax Rate ( Highest Rate) 40.5%Tax Due on Ordinary Income (B) $1,012,500

Commissions Paid Out as Divide $ 2,500,000Tax rate 23.8%Tax Due on Commission Income (C) $595,000Total Tax Due With IC-Disc (B + C) (D) $1,607,500

Total Tax Savings and Increased Cash- 417,500Flow (A-D)

The above illustration demonstrates the benefit that can be realized with an IC-DISC, with all else being equal. The magnitude of the tax benefit is driven by the amount of commissions paid into theIC-DISC. It should be the goal of every company with an established IC-DISC (or those consideringan IC-DISC) to maximize the amount of commissions paid into it, thereby increasing the amount of income that will be taxed at the preferential qualified dividend tax rate.

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.

MAXIMIZING THE COMMISSION

There are very few CPA or consulting firms who understand thecomplexities of the IC-DISC well enough to truly provide thebenefit intended by the United States Government. The IC-DISCis an export incentive supported by both sides of the aisle inCongress, but it is the exporter's responsibility to maximize thetax savings available to them.

The inter-company pricing rules between your company and theIC-DISC are subject to very complex limitations and groupingrules set forth in the Treasury Regulations, IRS rulings, andjudiciary precedents.

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.

IC-DISC REQUIREMENTS

• Must have one class of common shares with par or statedvalue of at least $2,500,

• 95% Qualified export receipts,

• 95% Qualified export assets,

• Maintain separate books and records, and• Must pay reasonable estimated dividends to shareholder(s)

within 60 days of IC-DISC year end.• Must have a commission agreement between the 2

companies

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.

ENJOY THE BENEFITS

OF THE IC -DISC

Circular 230 Notice –Any tax advice contained in this program is not intended to be used and cannot be used for the purposes of avoiding any penalties that may be imposed by the Internal Revenue Code.