In this episode of the IC-DISC Show, I sit down with Brian Schwam to discuss how Interest Charge Domestic International Sales Corporations (IC-DISCs) can help businesses save on taxes. With over 35 years of experience, Brian shares how IC-DISC has evolved since 1972 and why it remains a valuable tool for U.S. exporters. He explains how businesses, particularly in the aerospace industry's Maintenance, Repair, and Overhaul (MRO) sector, can take advantage of this incentive to improve their financial position.

We walk through a hypothetical example to illustrate how an exporting business could benefit from IC-DISC. Brian explains how companies involved in manufacturing, repairing, or trading parts can qualify and why many eligible businesses overlook this opportunity. We also discuss the annual MRO conference in Atlanta, where industry professionals gather to share insights and best practices. This event highlights the ongoing impact of IC-DISC within the aerospace sector and beyond.

Despite the clear benefits, many businesses hesitate to implement IC-DISC due to a lack of awareness or expertise. Brian talks about how our firm partners with CPA firms to integrate IC-DISCs into existing tax processes, making it easier for businesses to take advantage of these savings. He also highlights the underutilization of IC-DISC and why more companies should consider it as part of their tax strategy.

We wrap up by discussing the upcoming MRO America's Conference in Atlanta, where exporting aviation maintenance companies can connect and learn more about IC-DISC applications. Whether you're new to IC-DISC or looking to refine your approach, this conversation provides useful insights for businesses considering this tax-saving opportunity.

SHOW HIGHLIGHTS

• In this episode, I discuss the intricacies and benefits of Interest Charge Domestic International Sales Corporations (IC-DISC) with tax attorney Brian Schwam, who has over 35 years of experience in the field.


• We explore the historical context of IC-DISC, including its origins in 1972 and the significant changes it underwent following international scrutiny and U.S. tax reforms, such as the 2003 Bush tax cuts and the 2017 Tax Cuts and Jobs Act.


• Brian provides insights into how IC-DISC can serve as a valuable tax incentive for U.S. exporters, particularly those in the aerospace industry's Maintenance, Repair, and Overhaul (MRO) sector.


• Through a detailed hypothetical example, we illustrate how companies can leverage IC-DISC to maximize export profits, highlighting specific benefits for pass-through entities and closely held C corporations.


• We address common apprehensions businesses face regarding IC-DISC implementation and discuss how collaboration with CPA firms can facilitate a seamless integration into existing tax processes.


• Despite the clear benefits, IC-DISC remains underutilized, and we emphasize the potential missed opportunities for businesses not taking advantage of this tax-saving strategy.


• The episode also covers upcoming industry events, such as the annual MRO conference in Atlanta and the ICDISC Alliance Conference, which offer valuable networking and professional growth opportunities.

Contact Details

LinkedIn - Brian Schwam

LINKS

Show Notes

Be a Guest

About IC-DISC Alliance

About WTP Advisors

GUEST

Brian Schwam <button style="border: none; color: white; background-color: #4caf50; text-align: center; text-decoration: none; display: inline-block; font-size: 16px; margin: 4px 2px; cursor: pointer; border-radius: 3px;">About Brian</button>

Dave: Hey, brian, welcome to the podcast.

Brian: Thanks, dave, good to be here.

Dave: So where on planet Earth are you calling in from today? It's hard to tell by looking at your background.

Brian: Outer space. I am in the sunny South Florida.

Dave: Okay.

Brian: Breezy, south Florida, okay.

Dave: Now are you a native of Florida.

Brian: I am not a native of Florida. I spent 50 years of my life in the upper Midwest in Wisconsin. Okay, I had to move to Sunbelt.

Dave: Okay, Now were you educated in the Midwest then too.

Brian: I was. I'm a proud alum of the University of Wisconsin, both for an undergraduate degree in accounting and also my JD from the law school Okay.

Dave: So you've and I take it and I've known you a while, so I think that's been several decades ago that your career was started. Is that about right?

Brian: Several would be a good good approximation. Yes, I've been at this for 38 years. I know it doesn't look like it, right, okay?

Dave: And so, and how long have you been involved in ICDISC? Then Most of that time 38 years, oh, 38 years in ICDISC. Then most of that time, 38 years, oh, 38 years in the disc, wow, yeah. So how does that do you know? Do you have any way to quantify that? Like how many you know ICDISC returns you've, you know, signed or reviewed or prepared, or Boy, it's a big number, dave.

Brian: It's probably five figures. Okay, probably, so you know, somewhere north of 10,000 for sure. Okay, over that time period.

Dave: Well, and that is why I'm glad that you are one of the founding members of the IC Disc Alliance with me that when I had a chance to partner up with you and some of your team when we created the IC Disc Alliance, I was really excited because in my book I pretty much knew all the players in the IC Disc space and once the famous Neil Block retired after 50 years to me you were without peer in the IC Disc space.

Brian: So I really enjoyed collaborating with you through the years here in the ICDISC space, so I really enjoyed collaborating with you through the years.

Dave: Thank, you for that, Dave. I hope to be able to follow Neil into that 50-year stratosphere. Yeah, that's big shoes to follow. So let's just talk a bit about the ICDISC. What the heck is it? Why does everyone use that silly acronym?

Brian: Because what it really stands for is a mouthful.

Dave: Okay.

Brian: Discharged Domestic International Sales Corporation and that is what the ICDISC stands for, short right ICDISC. And I don't know if we'll get into. I'll get into what the IC stands for and everything. But basically this is an export incentive that's been in the Internal Revenue Code since 1972. Okay, in various forms. Initially it was an export incentive that just about any company could use, that was exporting goods that were manufactured, produced, grown or extracted in the US.

It came under some fire from our trading partners and in 1984, it was transformed into the ICDISC. It started out just as the DISC in 1972 for the Boston International Sales Corporation and it, like I said, came under scrutiny. Our trading partners said hey, you're a, you can't have an exemption from income because you're not. You know you tax things differently in your country. This flies in the face of the other incentives you give your taxpayers. So they changed it into the ICDIS, which made it into, instead of a permanent tax savings, at least on its face, into a temporary savings where, to the extent a taxpayer saved tax and deferred income from tax, they were required to pay an interest charge to the IRS on that deferred tax. Hence the IC.

Dave: Okay, okay.

Brian: That rate changes every year. It's based on the one-year average TBLO rate as of September 30th annually. And at the same time they instituted something called the Foreign Sales Corporation, which was widely used by thousands of companies, and that came under attack and eventually became the extraterritorial income exclusion whic