ReDISCovering A Tax Classic: The Domestic International Sales Corporation

Created by Congress in 1971 as a tax incentive for domestic exporters of U.S.-made goods, the domestic international sales corporation (DISC) remains a viable tool for small-to-medium sized exporters to reduce their federal income tax liability.[1]

A DISC typically is just “a shell corporation with no employees, the only purpose of which is to act as an accounting vehicle for the earnings of its affiliated or parent corporation.”[2]  Special transfer pricing rules allow DISCs to “skim[] the export profits of the parent corporation by taking ‘commissions’ on the parent’s export sales.”[3]

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