The Export Disc Corporation (IC-DISC): Computer Software And Internet Sales And Licenses – Part 1

The Interest Charge Domestic International Sales Corporation

The IC-DISC has been approved as an acceptable tax planning entity for the export of American produced computer software and programs as early as 1985.  In 1998, a very detailed set of Treasury Regulations were issued that have added certainty to this area of the law.

For purposes of determining the applicability of the DISC to computer software exports, two key analyses are often required.  First, (1) is the software “export property” for DISC purposes and (2) is the software product’s source of income “from without the U.S.”?  Is the product for use, consumption or sale without the U.S.?

In a technical advice memorandum in 1985,  the I.R.S. issued guidance on the issue of whether certain computer software programs constituted “export property” for DISC purposes.  That Technical Advice Memorandum reviewed the term “export property” for DISC purposes in depth and determined in its holding that computer software could indeed be “export property”. In doing so the Technical Advice not only reviewed the legislative history of the DISC rules it also pointed out the distinctively different treatment that “patents, inventions, models, decisions, formulas, or processes whether or not patented, copyrights, goodwill, trademarks, trade brands, franchise or other like property” receive under the DISC rules, as opposed to the treatment of “films, tapes, records or similar reproductions, for commercial or home use.”

The Copyright Rights are not “export property” for DISC purposes while the Copyright Articles are “export property”.

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Next:  Part 2 – The Export Property Analysis


Richard S. Lehman is a graduate of Georgetown Law School and obtained his Master’s degree in taxation from New York University. He has served as a law clerk to the Honorable William M. Fay, U.S. Tax Court and as Senior Attorney of the Interpretative Division in the Chief Counsel’s Office of the Internal Revenue Service in Washington D.C., the IRS’s internal law firm.

Mr. Lehman has had extensive experience with all areas of the Internal Revenue code that apply to American taxpayers and nonresident aliens and foreign corporations investing or conducting business in the United States, as well as U.S. citizens and domestic corporations investing abroad.

Mr. Lehman regularly works with law firms, accountants, businesses and individuals struggling to find their way through the complexities of the tax law.

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