Tax Alert: Senate Finance Committee Version of Tax Bill Repeals IC-DISC Provisions Effective for 2019 Tax Years

Tax Alert: Senate Finance Committee Version of Tax Bill Repeals IC-DISC Provisions Effective for 2019 Tax Years

Nov 10, 2017

Late on November 9th, the Joint Committee on Taxation released the text of the Senate Finance Committee version the Tax Cuts and Jobs Act.

Within the Bill is a provision to repeal the IC-DISC tax regime for tax years beginning on or after December 31, 2018.  The termination is effective for the immediately succeeding tax year.

Additionally, the bill further provides that any earnings of the IC-DISC that have not been distributed as of December 31, 2018 shall be deemed distributed in 2019. 

Finally, the bill provides that any amounts deemed or actually distributed after December 31, 2018 would not be considered qualified dividends and would be taxed as ordinary income.

If this provision is included in the final bill, passed and signed into law, the remainder of 2017 and 2018 will be an important time to maximize IC-DISC benefits, and make sure that all dividends are paid out prior to the end of 2018.

This is a very disturbing development for U.S. Exporters who will effectively lose their IC-DISC tax benefits after 2018 if this provision is passed.  Now is the time to do what can be done to save this important tax benefit for U.S. exporters.