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                                                                                                            Department of the Treasury
                                                                                                            Internal Revenue Service
Instructions for

Form 1120-IC-DISC

(Rev. December 2021)
Interest Charge Domestic International
Sales Corporation Return

Section references are to the Internal Revenue      the photographs and calling                   See section 441(h) and its regulations for 
Code unless otherwise noted.                        1-800-THE-LOST (1-800-843-5678) if you        more information.
Contents                                    Page    recognize a child.                            • Its election to be treated as an IC-DISC 
                                                                                                  is in effect for the tax year.
General Instructions .  . . . . . . . . . . . . 1
Purpose of Form .   . . . . . . . . . . . . . . 1   General Instructions                            See Definitions, later, and section 992 
Who Must File   . . . . . . . . . . . . . . . . 1                                                 and related regulations for details.
When To File .  . . . . . . . . . . . . . . . . 2   Purpose of Form                               Distribution to meet qualification re-
Where To File . . . . . . . . . . . . . . . . . 2   Form 1120-IC-DISC is an information           quirements. 
Who Must Sign .   . . . . . . . . . . . . . . . 2   return filed by interest charge domestic      • An IC-DISC that does not meet the 
Other Forms and Statements That                     international sales corporations              gross receipts test or qualified export 
May Be Required           . . . . . . . . . . . 2   (IC-DISCs), former DISCs, and former          asset test during the tax year will still be 
Assembling the Return .     . . . . . . . . . . 2   IC-DISCs.                                     considered to have met them if, after the 
Accounting Methods .      . . . . . . . . . . . 2                                                 tax year ends, the IC-DISC makes a pro 
Accounting Periods .    . . . . . . . . . . . . 3   What Is an IC-DISC?                           rata property distribution to its 
Rounding Off to Whole Dollars .       . . . . . 3   An IC-DISC is a domestic corporation that     shareholders and specifies at the time that 
Recordkeeping .   . . . . . . . . . . . . . . . 3   has elected to be an IC-DISC and its          this is a distribution to meet the 
Definitions . . . . . . . . . . . . . . . . . . . 3 election is still in effect. The IC-DISC      qualification requirements.
                                                    election is made by filing Form 4876-A,       • If the IC-DISC did not meet the gross 
Penalties . . . . . . . . . . . . . . . . . . . . 4 Election To Be Treated as an Interest         receipts test, the distribution equals the 
Specific Instructions . . . . . . . . . . . . . 5   Charge DISC.                                  part of its taxable income attributable to 
Schedule A .  . . . . . . . . . . . . . . . . . 6                                                 gross receipts that are not qualified export 
Schedule B .  . . . . . . . . . . . . . . . . . 7     Generally, an IC-DISC is not taxed on 
Schedule C  . . . . . . . . . . . . . . . . . . 8   its income. Shareholders of an IC-DISC        gross receipts.
Schedule E .  . . . . . . . . . . . . . . . .   10  are taxed on its income when the income       • If the IC-DISC did not meet the qualified 
Schedule J    . . . . . . . . . . . . . . . . . 11  is actually (or deemed) distributed. In       export asset test, the distribution equals 
                                                    addition, section 995(f) imposes an           the fair market value (FMV) of the assets 
Schedule K (Form                                                                                  that are not qualified export assets on the 
1120-IC-DISC) .         . . . . . . . . . . .   13  interest charge on shareholders for their 
Schedule L  . . . . . . . . . . . . . . . . .   13  share of DISC-related deferred tax liability. last day of the tax year.
                                                    See Form 8404, Interest Charge on             • If the IC-DISC did not meet either test, 
Schedule N .  . . . . . . . . . . . . . . . .   13  DISC-Related Deferred Tax Liability, for      the distribution generally equals the sum 
Schedule O .  . . . . . . . . . . . . . . . .   14  details.                                      of both amounts.
Schedule P (Form                                                                                    Regulations section 1.992-3 explains 
1120-IC-DISC) .         . . . . . . . . . . .   14    To be an IC-DISC, a corporation must        how to figure the distribution.
                                                    be organized under the laws of a state or 
Future Developments                                 the District of Columbia and meet the         Interest on late distribution.    If the 
For the latest information about                    following tests.                              IC-DISC makes a distribution after Form 
developments related to Form                        • At least 95% of its gross receipts during   1120-IC-DISC is due, interest must be 
1120-IC-DISC and its instructions, such as          the tax year are qualified export receipts.   paid to the United States Treasury. The 
legislation enacted after they were                 • At the end of the tax year, the adjusted    interest charge is 4 / % of the distribution 1 2
published, go to IRS.gov/                           basis of its qualified export assets is at    times the number of tax years that begin 
Form1120ICDISC.                                     least 95% of the sum of the adjusted basis    after the tax year to which the distribution 
                                                    of all of its assets.                         relates until the date the IC-DISC made 
What’s New                                          • It has only one class of stock, and its     the distribution.
                                                    outstanding stock has a par or stated           If the IC-DISC must pay this interest, 
Schedule C, line 14, formerly related to            value of at least $2,500 on each day of the   send the payment to the Internal Revenue 
section 965(a), which is no longer                  tax year (or, for a new corporation, on the   Service Center where you filed Form 
applicable for tax years after 2020, is now         last day to elect IC-DISC status for the      1120-IC-DISC within 30 days of making 
reserved for future use.                            year and on each later day).                  the distribution. On the payment, write the 
                                                    • It maintains separate books and             IC-DISC's name, address, and employer 
Photographs of Missing                              records.                                      identification number (EIN); the tax year; 
Children                                            • Its tax year must conform to the tax year   and a statement that the payment 
The IRS is a proud partner with the                 of the principal shareholder who has the      represents the interest charge under 
National Center for Missing & Exploited             highest percentage of voting power. If two    Regulations section 1.992-3(c)(4).
Children® (NCMEC). Photographs of                   or more shareholders have the highest 
missing children selected by the Center             percentage of voting power, the IC-DISC       Who Must File
may appear in instructions on pages that            must elect a tax year that conforms to that   The corporation must file Form 
would otherwise be blank. You can help              of any one of the principal shareholders.     1120-IC-DISC if it elected, by filing Form 
bring these children home by looking at 

Dec 30, 2021                                                  Cat. No. 11476W

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4876-A, to be treated as an IC-DISC and Who Must Sign reducing the acquiring corporation's basis
its election is in effect for the tax year. The return must be signed and dated by: in the property transferred. Once made,
If the corporation is a former DISC or • The president, vice president, treasurer, the election is irrevocable. For more
former IC-DISC, it must file Form assistant treasurer, chief accounting information, see section 362(e)(2) and
1120-IC-DISC in addition to any other officer; or Regulations section 1.362-4. If an election
return required. • Any other corporate officer (such as tax is made, a statement must be filed in
officer) authorized to sign. accordance with Regulations section
A former DISC is a corporation that 1.362-4(d)(3).
was a DISC on or before December 31, If a return is filed on behalf of a Form 8992. Use Form 8992 to figure the
1984, but failed to qualify as a DISC after corporation by a receiver, trustee, or domestic corporation's GILTI under
December 31, 1984, or did not elect to be assignee, the fiduciary must sign the section 951A and attach it to Form
an IC-DISC after 1984; and at the return, instead of the corporate officer. 1120-IC-DISC.
beginning of the current tax year, it had Returns and forms signed by a receiver or
undistributed income that was previously trustee in bankruptcy on behalf of a Form 8993. Use Form 8993 to figure the
taxed or it had accumulated DISC income. corporation must be accompanied by a amount of the eligible deduction for FDII
A former IC-DISC is a corporation that copy of the order or instructions of the and GILTI under section 250 and attach it
was an IC-DISC in an earlier year but did court authorizing signing of the return or to Form 1120-IC-DISC.
not qualify as an IC-DISC for the current form. Other forms and statements. See the
tax year; and at the beginning of the If an employee of the corporation Instructions for Form 1120 and Pub. 542
current tax year, it had undistributed completes Form 1120-IC-DISC, the paid for a list of other forms and statements a
income that was previously taxed or preparer's space should remain blank. corporation may need to file in addition to
accumulated IC-DISC income. See Anyone who prepares Form the forms and statements discussed
section 992 and related regulations. 1120-IC-DISC but does not charge the throughout these instructions.
A former DISC or former IC-DISC need corporation should not complete that
not complete lines 1 through 8 on page 1 section. Generally, anyone who is paid to Assembling the Return
and the schedules for figuring taxable prepare Form 1120-IC-DISC must sign it To ensure that the corporation's tax return
income, but must complete Schedules J, and fill in the “Paid Preparer Use Only” is correctly processed, attach all
L, and M of Form 1120-IC-DISC and area. schedules and other forms after the last
page of Form 1120-IC-DISC, and in the
Schedule K (Form 1120-IC-DISC). Write The paid preparer must complete the following order.
“Former DISC” or “Former IC-DISC” required preparer information and:
across the top of the return. • Sign the return in the space provided 1. Schedule N (Form 1120).
for the preparer's signature, and 2. Form 4136.
When To File • Give a copy of the return to the 3. Schedule D (Form 1120).
File Form 1120-IC-DISC by the 15th day taxpayer. 4. Form 8992.
of the 9th month after the IC-DISC's tax
year ends. No extensions are allowed. If Note. A paid preparer may sign original or 5. Form 8993.
the due date falls on a Saturday, Sunday, amended returns by rubber stamp, 6. Additional schedules in
or a legal holiday, the corporation may file mechanical device, or computer software alphabetical order.
on the next business day. program. 7. Additional forms in numerical order.
Where To File Other Forms and Complete every applicable entry space
on Form 1120-IC-DISC. Do not enter “See
If you are using the U.S. Postal Service, Statements That May Be Attached” or “Available Upon Request”
file Form 1120-IC-DISC at the following
address: Required instead of completing the entry spaces. If
more space is needed on the forms or
Informing Shareholders
Department of the Treasury schedules, attach separate statements
Shareholders who are foreign per- using the same size and format as the
Internal Revenue Service Center sons. The corporation should inform printed forms. If there are supporting
shareholders who are nonresident alien statements and attachments, arrange
individuals or foreign corporations, trusts, them in the same order as the schedules
Kansas City, MO 64999 or forms they support and attach them
or estates that if they have gains from
disposal of stock in the IC-DISC, former last. Show the totals on the printed forms.
Private delivery services (PDSs). DISC, or former IC-DISC, or distributions Enter the corporation's name and EIN on
Corporations may use certain PDSs from accumulated IC-DISC income, each supporting statement or attachment.
designated by the IRS to meet the “timely including deemed distributions, they must
mailing as timely filing” rule for tax returns. treat these amounts as effectively Accounting Methods
Go to IRS.gov/PDS. connected with the conduct of a trade or Figure taxable income using the method of
The PDS can tell you how to get written business conducted through a permanent accounting regularly used in keeping the
proof of the mailing date. establishment in the United States and IC-DISC's books and records. In all cases,
derived from sources within the United the method used must clearly show
For the IRS mailing address to use if States. taxable income. Permissible methods
you’re using a PDS, go to IRS.gov/
PDSstreetAddresses. Election to reduce basis under section include cash, accrual, or any other method
362(e)(2)(C). If property is transferred to authorized by the Internal Revenue Code.
Private delivery services cannot a corporation subject to section 362(e)(2), Generally, the following rules apply. For
! deliver items to P.O. boxes. You the transferor and the acquiring more information, see Pub. 538,
CAUTION must use the U.S. Postal Service
corporation may elect, under section Accounting Periods and Methods.
to mail any item to an IRS P.O. box 362(e)(2)(C), to reduce the transferor's
address. basis in the stock received instead of

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• An IC-DISC must use the accrual shareholders have the highest percentage property, but only if there is a recognized
method of accounting if its average annual of voting power, the IC-DISC must have a gain.
gross receipts for the 3 prior tax years tax year that conforms to the tax year of 5. Dividends (or amounts includible in
exceed $26 million. However, see any such shareholder. See section 441(h). gross income under section 951) with
Nonaccrual experience method for service respect to stock of a related foreign export
providers, later. See Pub. 538 for more information on
corporation (defined later).
• Unless it is a small business taxpayer accounting periods and tax years.
(defined below), an IC-DISC must use the 6. Interest on any obligation that is a
accrual method for sales and purchases of Rounding Off to Whole qualified export asset.
7. Gross receipts for engineering or
inventory items. See Cost of Goods Sold, Dollars architectural services for construction
later.
• A member of a controlled group may The IC-DISC may round off cents to whole projects outside the United States.
not use an accounting method that would dollars on its return and schedules. If the
distort any group member's income, IC-DISC does round to whole dollars, it 8. Gross receipts for the performance
including its own. For example, an must round all amounts. To round, drop of managerial services in furtherance of
IC-DISC acts as a commission agent for amounts under 50 cents and increase the production of other qualified export
property sales by a related corporation amounts from 50 to 99 cents to the next receipts of an IC-DISC.
that uses the accrual method and pays the dollar (for example, $1.39 becomes $1 For more information, see Regulations
IC-DISC its commission more than 2 and $2.50 becomes $3). section 1.993-1.
months after the sale. In this case, the If two or more amounts must be added Qualified export assets. Qualified
IC-DISC should not use the cash method to figure the amount to enter on a line, export assets are any of the following.
of accounting because that method include cents when adding the amounts 1. Export property (defined later).
materially distorts its income. and round off only the total.
2. Assets used primarily in connection
Small business taxpayer. A small with the sale, lease, rental, storage,
business taxpayer is a taxpayer that (a) Recordkeeping handling, transportation, packaging,
has average annual gross receipts of $26 Keep the IC-DISC's records for as long as assembly, or servicing of export property,
million or less for the 3 prior tax years, and they may be needed for the administration or the performance of engineering or
(b) is not a tax shelter (as defined in of any provision of the Internal Revenue architectural services described in item 7
section 448(d)(3)). See section 471(c). Code. Usually, records that support an of Qualified export receipts, earlier, or
A small business taxpayer can adopt or item of income, deduction, or credit on the managerial services in furtherance of the
change its accounting method to account return must be kept for 3 years from the production of qualified export receipts
for inventories (a) in the same manner as date the return is due or filed, whichever is described in items 1, 2, 3, and 7, earlier.
materials and supplies that are later. Keep records that verify the 3. Accounts receivable and evidences
nonincidental, or (b) to conform to its IC-DISC's basis in property for as long as of indebtedness produced by transactions
treatment of inventories in an applicable they are needed to figure the basis of the listed under Qualified export receipts,
financial statement (as defined in section original or replacement property. items 1–4, 7, and 8, earlier.
451(b)(3)). If it does not have an
applicable financial statement, it can use The IC-DISC should keep copies of all 4. Temporary investments, such as
the method of accounting used in its filed returns. They help in preparing future money and bank deposits, in an amount
books and records prepared according to and amended returns and in the reasonable to meet the IC-DISC's needs
its accounting procedures. See section calculation of earnings and profits. for working capital.
471(c)(1). 5. Obligations related to a producer's
Definitions loan (defined later).
Change in accounting method. To
change its method of accounting used to The following definitions are based on 6. Stock or securities of a related
report taxable income, for income as a sections 993 and 994. foreign export corporation (defined later).
whole or for the treatment of any material Note. “United States,” as used in the 7. Certain obligations that are issued,
item, the IC-DISC must file Form 3115, following instructions, includes Puerto guaranteed or insured by the U.S.
Application for Change in Accounting Rico and U.S. possessions, as well as the Export-Import Bank or the Foreign Credit
Method. 50 states and the District of Columbia. Insurance Association and that the
See the Instructions for Form 3115 and IC-DISC acquires from such bank or
Pub. 538 for more information and Section 993 association or from the person who sold or
bought the goods or services from which
exceptions. Also see Rev. Proc. 2018-31, Qualified export receipts. Qualified the obligations arose.
2018-22 I.R.B. 637 (or any successor). export receipts are any of the following.
8. Certain obligations held by the
1. Gross receipts from selling, IC-DISC that were issued by a domestic
Accounting Periods exchanging, or otherwise disposing of corporation organized to finance export
An IC-DISC must figure its taxable income export property. property sales under an agreement with
on the basis of a tax year. A tax year is the 2. Gross receipts from leasing or the Export-Import Bank under which the
annual accounting period an IC-DISC renting export property that the lessee domestic corporation makes export loans
uses to keep its records and report its uses outside the United States. that the Export-Import Bank guarantees.
income and expenses. Generally,
IC-DISCs may use a calendar year or a 3. Gross receipts from supporting 9. Amounts (other than reasonable
fiscal year. services related to any qualified sale, working capital) on deposit in the United
exchange, lease, rental, or other States used to acquire qualified export
Note. The tax year of an IC-DISC must be disposition of export property by the assets within the time provided by
the same as the tax year of the principal IC-DISC. Regulations section 1.993-2(j).
shareholder which, at the beginning of the 4. Gross receipts from selling, See Regulations section 1.993-2 for
IC-DISC tax year, has the highest exchanging, or otherwise disposing of more information.
percentage of voting power. If two or more qualified export assets that are not export

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -3-

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Export property. Export property must qualified export assets listed in items 3 10% of the IC-DISC's export promotion
be: and 4 of Qualified export assets, earlier; expenses attributable to the receipts;
and 2. 50% of the IC-DISC's and the
•
1. Made, grown, or extracted in the The adjusted basis of the qualified seller's combined taxable income from
United States by a person other than an export assets in items 1–4 of Qualified qualified export receipts on the property,
IC-DISC; export assets, earlier, that the foreign derived from the IC-DISC's sale of the
2. Neither excluded under section corporation held at the end of the tax year property plus 10% of the IC-DISC's export
993(c)(2) nor declared in short supply is at least 95% of the adjusted basis of all promotion expenses attributable to the
under section 993(c)(3); assets it held at the end of such tax year. receipts; or
3. Held mainly for sale, lease, or rent 2. A real property holding 3. Taxable income based on the sale
in the ordinary course of a trade or company is a related foreign export price actually charged, provided that
business, by or to an IC-DISC for direct corporation if: under section 482 the price actually
use, consumption, or disposition outside • The IC-DISC directly owns more than charged clearly reflects the taxable
the United States; 50% of the total voting power of the income of the IC-DISC and the related
4. Property not more than 50% of the foreign corporation's stock, and person.
FMV of which is attributable to articles • Its exclusive function is to hold title to
imported into the United States; and real property located outside the United Schedule P (Form 1120-IC-DISC),
5. Neither sold nor leased by or to States for the exclusive use (under lease Intercompany Transfer Price or
another IC-DISC that, immediately before or otherwise) of the IC-DISC and Commission, explains the intercompany
or after the transaction, either belongs to applicable foreign law forbids the IC-DISC pricing rules in more detail.
the same controlled group (defined in to hold title to the property.
Section 994(c), Export
section 993(a)(3)) as your IC-DISC or is 3. An associated foreign
related to your IC-DISC in a way that corporation is a related foreign export Promotion Expenses
would result in losses being denied under corporation if: These are expenses incurred to help
section 267. • The IC-DISC or a controlled group of distribute or sell export property for use or
corporations to which the IC-DISC distribution outside the United States.
See Regulations section 1.993-3 for belongs owns less than 10% of the total These expenses do not include income
details. voting power of the foreign corporation's tax, but do include 50% of the cost of
A producer's loan. A producer's loan stock (section 1563 defines a controlled shipping the export property on
must meet all the following terms. group in this sense, and sections 1563(d) U.S.-owned and U.S.-operated aircraft or
and (e) define ownership), and ships in those cases where U.S. law or
1. Satisfy the requirements of sections The IC-DISC's ownership of the foreign regulations do not require that the export
993(d)(2) and (3). •
corporation's stock or securities property be shipped on such aircraft or
2. Not raise the unpaid balance due reasonably furthers transactions that lead ships.
the IC-DISC on all of its producer's loans to qualified export receipts for the Deficits in Earnings and Profits
above the level of accumulated IC-DISC IC-DISC.
income it had at the start of the month in A deficit in earnings and profits is
which it made the loan. See Regulations section 1.993-5 for chargeable in the following order.
more information about related foreign 1. First, to any earnings and profits
3. Be evidenced by a note, or other export corporations. other than accumulated IC-DISC income
written evidence of indebtedness, with a
stated maturity date no more than 5 years Gross receipts. Gross receipts are the or previously taxed income.
after the date of the loan. IC-DISC's total receipts from selling, 2. Second, to any accumulated
4. Be made to a person engaged in a leasing, or renting property that the IC-DISC income.
U.S. trade or business of making, growing, corporation holds for sale, lease, or rent in
3. Third, to previously taxed income.
or extracting export property. the ordinary course of its trade or business
and gross income from all other sources. Do not apply any deficit in earnings and
5. Be designated as a producer's loan For commissions on selling, leasing, or profits against accumulated IC-DISC
when made. renting property, include gross receipts income that, as a result of the
For more information, see Schedule Q from selling, leasing, or renting the corporation's revoking its election to be
(Form 1120-IC-DISC), Borrower's property on which the commissions arose. treated as an IC-DISC (or other
Certificate of Compliance With the Rules See Regulations section 1.993-6 for more disqualification), is deemed distributed to
for Producer's Loans, and Regulations information. the shareholders. See section 995(b)(2)
(A).
section 1.993-4. Section 994, Intercompany
A related foreign export corporation. Pricing Rules Penalties
A related foreign export corporation If a related person described in section The IC-DISC may have to pay the
includes the following. 482 sells export property to the IC-DISC, following penalties unless it can show that
1. A foreign international sales use the intercompany pricing rules to it had reasonable cause for not providing
corporation is a related foreign export figure taxable income for the IC-DISC and information or not filing a return.
corporation if: the seller. These rules generally do not • $100 for each instance of not providing
• The IC-DISC directly owns more than permit the related person to price at a loss. required information, up to $25,000 during
50% of the total voting power of the Under intercompany pricing, the the calendar year.
foreign corporation's stock; IC-DISC's taxable income from the sale • $1,000 for not filing a return.
• For the tax year that ends with or within (regardless of the price actually charged)
the IC-DISC's tax year, at least 95% of the may not exceed the greatest of: See section 6686 for other details.
foreign corporation's gross receipts 1. 4% of qualified export receipts on If you receive a notice about penalty
consists of the qualified export receipts the IC-DISC's sale of the property plus and interest after you file Form
described in items 1–4 of Qualified export 1120-IC-DISC, send us an explanation
receipts, earlier, and interest on the and we will determine if you meet

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reasonable-cause criteria. Do not attach United States or U.S. possessions can Question G(1)
an explanation when you file Form use the online application. Foreign
1120-IC-DISC. corporations should call 267-941-1099 For rules of stock attribution, see section
(not a toll free number) for more 267(c). If the owner of the voting stock of
Trust fund recovery penalty. This the IC-DISC was an alien individual or a
information on obtaining an EIN. See the
penalty may apply if certain excise, foreign corporation, partnership, trust, or
Instructions for Form SS-4.
income, social security, and Medicare estate, check the “Yes” box in the “Foreign
taxes that must be collected or withheld EIN applied for but not received. If the owner” column and enter the name of the
are not collected or withheld, or these corporation has not received its EIN by the owner's country, in parentheses, in the
taxes are not paid. These taxes are time the return is due, enter "Applied For" address column. “Owner's country” for
generally reported on: and the date the corporation applied in the individuals is their country of residence;
• Form 720, Quarterly Federal Excise space for the EIN. However, if the for other foreign entities, it is the country in
Tax Return; corporation is filing its return electronically, which organized or otherwise created, or
• Form 941, Employer's QUARTERLY an EIN is required at the time the return is in which administered.
Federal Tax Return; filed. An exception applies to subsidiaries
• Form 944, Employer's Annual Federal of corporations whose returns are filed Taxable Income
Tax Return; or with the parent's electronically filed An IC-DISC must figure its taxable income
• Form 945, Annual Return of Withheld consolidated Form 1120. These although it does not pay most taxes. An
Federal Income Tax. subsidiaries should enter "Applied For" in IC-DISC is exempt from the corporate
The trust fund recovery penalty may be the space for the EIN on their returns. The income tax and accumulated earnings tax.
imposed on all persons who are subsidiaries' returns are identified under
determined by the IRS to have been the parent corporation's EIN. An IC-DISC may not claim the general
responsible for collecting, accounting for, For more information, see the business credit or the credit for fuel
and paying over these taxes, and who Instructions for Form SS-4. produced from a nonconventional source.
acted willfully in not doing so. The penalty In addition, these credits may not be
passed through to shareholders of the
is equal to the full amount of the unpaid Item E—Total Assets corporation.
trust fund tax. See the Instructions for
Form 720 or Pub. 15 (Circular E), Enter the IC-DISC's total assets (as
Employer's Tax Guide, for details, determined by the accounting method Line 6a. Net Operating Loss (NOL)
including the definition of responsible regularly used in keeping the IC-DISC's Deduction
persons. books and records) at the end of the tax
year. If there are no assets at the end of The NOL deduction is the amount of the
Other penalties. Other penalties may be the tax year, enter -0-. NOL carryover and NOL carryback. The
imposed for negligence, substantial 2-year carryback rule does not apply to
understatement of tax, reportable NOLs arising in tax years ending after
transaction understatements, and fraud. Item F—Initial Return, Final Return, December 31, 2017. Exceptions apply to
See sections 6662, 6662A, and 6663. Name Change, Address Change, NOLs of certain farming losses and NOLs
or Amended Return of insurance companies (other than life
Specific Instructions • If this is the IC-DISC's initial or final insurance companies). See section 172(b)
return, check the applicable box in item F for details.
Entity Information at the top of the form. The following special rules apply. The
• If the IC-DISC has changed its address corporation may elect under section
Period Covered since it last filed a return, check the box for 965(n) to reduce the amount of the NOL
Enter the tax year in the space provided at “Address change.” for a tax year and the amount of taxable
the top of the form. For a calendar year, income reduced by NOL carryovers or
enter the last two digits of the calendar Note. If a change in address or carrybacks to such tax year. See section
year in the first entry space. For a fiscal or responsible party occurs after the return is 965(n) for more information.
short tax year return, fill in the tax year filed, use Form 8822-B, Change of
space at the top of the form. Address or Responsible Party —
Business, to notify the IRS. See the Line 7. Taxable Income
Address instructions for Form 8822-B for details. If the IC-DISC uses either the gross
Include the suite, room, or other unit • If the IC-DISC changed its name since it receipts method or combined taxable
number after the street address. If the last filed a return, check the box for “Name income method to figure the IC-DISC's
Post Office does not deliver mail to the change.” Generally, an IC-DISC must also taxable income attributable to any
street address and the corporation has a have amended its articles of incorporation transactions involving products or product
P.O. box, show the box number instead. and filed the amendment with the state in lines, attach Schedule P (Form
which it was incorporated. 1120-IC-DISC). Show in detail the
• To correct an error on a Form IC-DISC's taxable income attributable to
Item C—Employer Identification 1120-IC-DISC already filed, file an each such transaction or group of
Number (EIN) amended Form 1120-IC-DISC and check transactions.
Enter the corporation's EIN. If the the “Amended return” box. If the amended Net operating loss (NOL). If line 7
corporation does not have an EIN, it must return changes the income or distributions (figured without regard to the items listed
apply for one. An EIN may be applied for: of income to shareholders, an amended above under minimum taxable income) is
• Online – Go to IRS.gov/EIN. The EIN is Schedule K (Form 1120-IC-DISC) must be zero or less, the corporation may have an
issued immediately once the application filed with the amended Form NOL that can be carried back or forward
information is validated. 1120-IC-DISC and given to each as a deduction to other tax years.
• By faxing or mailing Form SS-4, shareholder. Write “AMENDED” across Generally, a corporation first carries back
Application for Employer Identification the top of the corrected Schedule K you an NOL attributable to farming losses 2
Number. Corporations located in the give to each shareholder. tax years. However, the corporation can
elect to waive the carryback period and

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instead carry the farming NOL forward to million or less (indexed for inflation) for the A small business taxpayer is not
future tax years. See the Instructions for 3 preceding tax years, and (b) is not a tax required to capitalize costs under section
Form 1139 for other special rules and shelter (as defined in section 448(d)(3)). 263A. See section 263A(i).
elections. See section 471(c).
For details, see Regulations section
Note. The NOL is limited to 80% of Enter amounts paid for merchandise 1.263A-3(d).
taxable income (determined without during the tax year on line 2. The amount
regard to the net operating loss) for losses the IC-DISC may deduct for the tax year is Enter on line 4 the balance of section
arising in tax years beginning after figured on line 8. 263A costs paid or incurred during the tax
December 31, 2017. year not includible on lines 2, 3, and 5.
All filers not using the cash method of
Line 8. Refundable Credit for accounting should see Section 263A Line 5. Other Costs
uniform capitalization rules, later, before
Federal Tax Paid on Fuels completing Schedule A. Enter on line 5 any costs paid or incurred
Enter the credit from Form 4136. during the tax year not entered on lines 2
If the IC-DISC uses intercompany through 4.
pricing rules (for purchases from a related
Schedule A supplier), use the transfer price figured in Line 7. Inventory at End of Year
Cost of Goods Sold Part II of Schedule P (Form
Generally, inventories are required at the 1120-IC-DISC). See Regulations sections 1.263A-1
through 1.263A-3 for details on figuring
beginning and end of each tax year if the If the IC-DISC acts as another person's the amount of additional section 263A
purchase or sale of merchandise is an commission agent on a sale, do not enter costs to be included in ending inventory. If
income-producing factor. See Regulations any amount in Schedule A for the sale. the IC-DISC accounts for inventoriable
section 1.471-1. If inventories are See Schedule P (Form 1120-IC-DISC). items in the same manner as
required, you must generally use an nonincidental materials and supplies,
accrual method of accounting for sales enter on line 7 the portion of your raw
and purchases of inventory items. Line 1. Inventory at Beginning of materials and merchandise purchased for
Exceptions for certain taxpayers. A Year resale that was included in the total on
small business taxpayer (defined below) If the IC-DISC is changing its method of line 6 but was not sold during the year.
can adopt or change its accounting accounting for the current tax year, it must
method to account for inventories in the refigure last year's closing inventory using Lines 9a Through 9f. Inventory
same manner as materials and supplies the new method of accounting and enter Valuation Methods
that are nonincidental, or conform to its the result on line 1. If there is a difference
treatment of inventories in an applicable between last year's closing inventory and Inventories may be valued at:
financial statement (as defined in section the refigured amount, attach an • Cost,
451(b)(3)) (or the method of accounting explanation and take it into account when • Cost or market value (whichever is
used in its books and records prepared in figuring the IC-DISC's section 481(a) lower), or
accordance with its accounting adjustment. • Any other method approved by the IRS
procedures, if applicable financial that conforms to the requirements of the
applicable regulations cited later.
statements are not used). See section Line 4. Additional Section 263A
471(c)(1).
Costs However, if the IC-DISC is using the
If you account for inventories in the cash method of accounting, it is required
same manner as nonincidental materials An entry is required on this line only for
and supplies, inventory costs for raw IC-DISCs that have elected a simplified to use cost.
materials purchased for use in producing method of accounting.
IC-DISCs that use erroneous valuation
finished goods and merchandise methods must change to a method
purchased for resale are deductible in the For IC-DISCs that have elected the
permitted for federal income tax purposes.
year the finished goods or merchandise simplified production method, additional
Use Form 3115 to make this change. See
are sold (but not before the year you paid section 263A costs are generally those
the Instructions for Form 3115. Also see
for the raw materials or merchandise, if costs, other than interest, that were not
Pub. 538.
you are also using the cash method). capitalized under the IC-DISC's method of
Under this accounting method, you can accounting immediately prior to the On line 9a, check the method(s) used
currently deduct expenditures for direct effective date of section 263A but are now for valuing inventories. Under lower of cost
labor and all indirect costs that would required to be capitalized under section or market, the term “market” (for normal
otherwise be included in inventory costs. 263A. For details, see Regulations section goods) means the current bid price
See the instructions for lines 2 and 7. 1.263A-2(b). prevailing on the inventory valuation date
for the particular merchandise in the
A small business taxpayer claiming For IC-DISCs that have elected the volume usually purchased by the
exemption from the requirement to keep simplified resale method, additional taxpayer. If section 263A applies to the
inventories is changing its method of section 263A costs are generally those taxpayer, the basic elements of cost must
accounting for purposes of section 481. costs incurred with respect to the following reflect the current bid price of all direct
For additional guidance on this method of categories. costs and all indirect costs properly
on adopting or changing to this method of •
accounting, see Pub. 538. For guidance Off-site storage or warehousing. allocable to goods on hand at the
accounting, see Form 3115 and its • Purchasing. inventory date.
instructions. • Handling, such as processing,
assembling, repackaging, and Inventory may be valued below cost
Small business taxpayer. A small transporting. when the merchandise is unsalable at
business taxpayer is a taxpayer that (a) • General and administrative costs normal prices or unusable in the normal
has average annual gross receipts of $26 (mixed service costs). way because the goods are subnormal

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due to damage, imperfections, shopwear, method, including information on safe following conditions to meet the
etc., within the meaning of Regulations harbor methods. For information on a destination test.
section 1.471-2(c). The goods may be book safe harbor method of accounting for 1. Within the United States to a carrier
valued at the current bona fide selling corporations that use the nonaccrual or freight forwarder for ultimate delivery
price, minus direct cost of disposition (but experience method of accounting, see outside the United States to a buyer or
not less than scrap value). Bona fide Rev. Proc. 2011-46, 2011-42 I.R.B. 518, lessee.
selling price means actual offering of as modified by Rev. Proc. 2016-29,
goods during a period ending not later 2016-21 I.R.B. 880. Also see the 2. Within the United States to a buyer
than 30 days after inventory date. Instructions for Form 3115 for procedures or lessee who, within 1 year of the sale or
to obtain automatic consent to change to lease, delivers it outside the United States
If this is the first year the Last-in, this method or make certain changes or delivers it to another person for ultimate
First-out (LIFO) inventory method was within this method. delivery outside the United States.
either adopted or extended to inventory Corporations that qualify to use the 3. Within or outside the United States
goods not previously valued under the nonaccrual experience method should to an IC-DISC that is not a member of the
LIFO method provided in section 472, attach a statement showing total gross same controlled group (as defined in
attach Form 970, Application To Use LIFO receipts, the amount not accrued as a section 993(a)(3)) as the seller or lessor.
Inventory Method, or a statement with the result of the application of section 448(d) 4. Outside the United States by
information required by Form 970. Also (5), and the net amount accrued. Enter the means of the seller's delivery vehicle
check the LIFO box on line 9c. On line 9d, amount on the applicable line of (ship, plane, etc.).
enter the amount or the percent of total Schedule B. 5. Outside the United States to a
closing inventories computed under
section 472. Estimates are acceptable. buyer or lessee at a storage or assembly
Commissions: Special Rule site if the property was previously shipped
from the United States by the seller or
If the IC-DISC changed or extended its Note. “United States,” as used in the lessor.
inventory method to LIFO and had to write following instructions, includes Puerto
up the opening inventory to cost in the Rico and U.S. possessions, as well as the 6. Outside the United States to a
year of election, report the effect of the 50 states and the District of Columbia. purchaser or lessee if the property was
write-up as other income (Schedule B, previously shipped by the seller or lessor
line 2j or 3f), proportionately over a 3-year If the IC-DISC received commissions from the United States and if the property
period that begins with the year of the on selling or renting property or furnishing is located outside the United States
LIFO election. services, list in column (b) the gross pursuant to a prior lease by the seller or
receipts from the sales, rentals, or lessor, and either (a) the prior lease
Schedule B services on which the commissions arose, terminated at the expiration of its term (or
Gross Income and in column (c), list the commissions by the action of the prior lessee acting
earned. In column (d), report receipts from alone), (b) the sale occurred or the term of
If an income item falls into two or more noncommissioned sales or rentals of the subsequent lease began after the time
categories, report each part on the property or furnishing of services, as well at which the term of the prior lease would
applicable line. For example, if interest as all other receipts. have expired, or (c) the lessee under the
income consists of qualified interest from subsequent lease is not a related person
(a member of the same controlled group
a foreign international sales corporation For purposes of completing lines 1a as defined in section 993(a)(3) or a
and nonqualifying interest from a domestic and 1b, related purchasers are members relationship that would result in a
obligation, enter the qualified interest on of the same controlled group (as defined disallowance of losses under section 267
an attached statement for line 2g and the in section 993(a)(3)) as the IC-DISC. All or section 707(b)) immediately before or
nonqualifying interest on an attached other purchasers are unrelated. after the lease with respect to the lessor,
statement for line 3f.
and the prior lease was terminated by the
For gain from selling qualified export A qualified export sale or lease must action of the lessor (acting alone or
assets, attach a separate statement in meet a use test and a destination test in together with the lessee).
addition to the forms required for lines 2h order to qualify.
and 2i. Line-by-Line Instructions
Nonaccrual experience method for The use test applies at the time of the Line 1a. Enter the IC-DISC's qualified
service providers. Accrual method sale or lease. If the property is used export receipts from export property sold
corporations are not required to accrue predominantly outside the United States to foreign, unrelated buyers for delivery
certain amounts to be received from the and the sale or lease is not for ultimate outside the United States. Do not include
performance of services that, on the basis use in the United States, it is a qualified amounts entered on line 1b.
of their experience, will not be collected, if: export sale or lease. Otherwise, if a
• The services are in the fields of health, reasonable person would believe that the Line 1b. Enter the IC-DISC's qualified
law, engineering, architecture, accounting, property will be used in the United States, export receipts from export property sold
actuarial science, performing arts, or the sale or lease is not a qualified export for delivery outside the United States to a
consulting; or sale or lease. For example, if property is related foreign entity for resale to a
• The corporation's average annual gross sold to a foreign wholesaler and it is foreign, unrelated buyer, or an unrelated
receipts for any prior 3-tax-year period known in trade circles that the wholesaler, buyer when a related foreign entity acts as
does not exceed $26 million. For more to a substantial extent, supplies the U.S. commission agent.
details, see section 448(d)(5). retail market, the sale would not be a Line 2a. Enter the gross amount received
This provision does not apply to any qualified export sale, and the receipts from leasing or subleasing export property
amount if interest is required to be paid on would not be qualified export receipts. to unrelated persons for use outside the
the amount or if there is any penalty for United States.
failure to timely pay the amount. See Regardless of where title or risk of loss Receipts from leasing export property
Regulations section 1.448-2 for shifts from the seller or lessor, the property may qualify in some years and not in
information on the nonaccrual experience must be delivered under one of the

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others, depending on where the lessee appropriate lines of Form 3115 to make dividends-received deduction under
uses the property. Enter only receipts that the election. See the Instructions for Form section 243 is limited by section 854(b).
qualify during the tax year. (Use 3115 for more information. The corporation should receive a notice
Schedule E to deduct expenses such as Include any net positive section 481(a) from the RIC specifying the amount of
repairs, interest, taxes, and depreciation.) adjustment on Schedule B, line 2j or 3f dividends that qualify for the deduction.
Line 2b. A service connected to a sale or (depending on whether the inventory,
lease is related to it if the service is usually when sold, will generate qualified export Report so-called dividends or earnings
furnished with that type of sale or lease in receipts). If the net section 481(a) received from mutual savings banks, etc.,
the trade or business where it took place. adjustment is negative, report it on as interest. Do not treat them as
A service is subsidiary if it is less important Schedule E, line 2g. dividends.

than the sale or lease. Line 3b. Enter receipts from selling Line 2, Column (a)
Line 2c. Include receipts from products subsidized under a U.S. program
engineering or architectural services on if they have been designated as excluded Enter on line 2:
foreign construction projects abroad or receipts. • Dividends (except those received on
certain debt-financed stock acquired after
proposed for location abroad. These Line 3c. Enter receipts from selling or July 18, 1984) that are received from
services include feasibility studies, design leasing property or services for use by any 20%-or-more-owned domestic
and engineering, and general supervision part of the U.S. government if law or corporations subject to income tax and
of construction, but do not include regulations require U.S. products or that are eligible for the 65% deduction
services connected with mineral services to be used. under section 243(c), and
exploration.
Line 3d. Enter receipts from any IC-DISC • Taxable distributions from an IC-DISC
Line 2d. Include receipts for export that belongs to the same controlled group or former DISC that are considered
management services provided to (as defined in section 993(a)(3)). eligible for the 65% deduction.
unrelated IC-DISCs.
Line 3e. Nonqualified dividends and
Line 2e. Qualified dividends and inclusions from Schedule C, line 20a. Line 3, Column (a)
inclusions from Schedule C, line 19a. Enter the following.
Line 3f. Include in an attached statement
Line 2f. Include interest received on any any nonqualifying gross receipts not • Dividends received on certain
loan that qualifies as a producer's loan. reported on lines 3a through 3e. Do not debt-financed stock acquired after July 18,
Line 2g. Enter interest on any qualified offset an income item against a similar 1984, from domestic and foreign
export asset other than interest on expense item. corporations subject to income tax and
that would otherwise be subject to the
producer's loans. For example, include The IC-DISC may have to report a dividends-received deduction under
interest on accounts receivable from sales section 481(a) adjustment on line 3f. See section 243(a)(1), 243(c), or 245(a).
in which the IC-DISC acted as a principal Section 481(a) adjustment, earlier, for Generally, debt-financed stock is stock
or agent and interest on certain obligations additional information. that the corporation acquired by incurring
issued, guaranteed, or insured by the a debt (for example, it borrowed money to
Export-Import Bank or the Foreign Credit Schedule C buy the stock).
Insurance Association. Dividends received from a RIC on
•
Line 2h. On Schedule D (Form 1120), Dividends, Inclusions, and debt-financed stock. The amount of
Capital Gains and Losses, report in detail Special Deductions dividends eligible for the
every sale or exchange of a capital asset, For purposes of the 20% ownership test dividends-received deduction is limited by
even if there is no gain or loss. on lines 1 through 7, the percentage of section 854(b). The corporation should
In addition to Schedule D (Form 1120), stock owned by the corporation is based receive a notice from the RIC specifying
attach a separate statement figuring gain on voting power and value of the stock. the amount of dividends that qualify for the
from the sale of qualified export assets. Preferred stock described in section deduction.
1504(a)(4) is not taken into account.
Line 2i. Enter the net gain or loss from
line 18, Part II, Form 4797, Sales of Line 3, Columns (b) and (c)
Business Property. Line 1, Column (a) Dividends received on certain
In addition to Form 4797, attach a Enter dividends (except those received on debt-financed stock acquired after July 18,
separate statement figuring gain from the certain debt-financed stock acquired after 1984, are not entitled to the full 50% or
sale of qualified export assets. July 18, 1984—see section 246A) that: 65% dividends-received deduction. The
• Are received from 50% or 65% deduction is reduced by a
Line 2j. Enter any other qualified export less-than-20%-owned domestic percentage that is related to the amount of
receipts for the tax year not reported on corporations subject to income tax, and debt incurred to acquire the stock. See
lines 2a through 2i. • Qualify for the 50% deduction under section 246A. Also see section 245(a)
Section 481(a) adjustment. The section 243(a)(1). before making this computation for an
IC-DISC may have to make an adjustment Also include the following on line 1. additional limitation that applies to
under section 481(a) to prevent amounts • Taxable distributions from an IC-DISC dividends received from foreign
of income or expense from being or former DISC that are designated as corporations. Attach a statement to Form
duplicated or omitted. This section 481(a) being eligible for the 50% deduction and 1120-IC-DISC showing how the amount
adjustment period is generally 1 year for a certain dividends of Federal Home Loan on line 3, column (c), was figured.
net negative adjustment and 4 years for a Banks. See section 246(a)(2).
net positive adjustment. However, an • Dividends received (except those Line 4, Column (a)
IC-DISC may elect to use a 1-year received on certain debt-financed stock Enter dividends received on the preferred
adjustment period if the net section 481(a) acquired after July 18, 1984) from a stock of a less-than-20%-owned public
adjustment for the change is less than regulated investment company (RIC). The utility that is subject to income tax and is
$25,000. The IC-DISC must complete the amount of dividends eligible for the

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allowed the deduction provided in section 3. Add lines 2, 5, 7, and 8, column Lines 12a, 12b, and 12c, Column
247 for dividends paid. (c), and the part of the deduction
on line 3, column (c), that is (a)
attributable to dividends received Enter Subpart F inclusions derived from
Line 5, Column (a) from 20%-or-more-owned the sale by a CFC.
Enter dividends received on preferred corporations. . . . . . . . . .
stock of a 20%-or-more-owned public 4. Enter the smaller of line 2 or • Line 12a: Enter the foreign-source
line 3. If line 3 is larger than portion of any Subpart F inclusions
utility that is subject to income tax and is line 2, do not complete the rest of attributable to the sale or exchange by a
allowed the deduction under section 247 this worksheet. Instead, enter the CFC of stock in another foreign
for dividends paid. amount from line 4 in the margin corporation described in section 964(e)
next to line 9 of Schedule C and (4). This should equal the U.S.
Line 6, Column (a) on line 6b, page 1, Form shareholder's pro rata share of the amount
1120-IC-DISC . . . . . . . . . reported on Form 5471, Information
Enter the U.S.-source portion of dividends 5. Enter the total amount of Return of U.S. Persons With Respect to
that: dividends received from Certain Foreign Corporations, Schedule I,
• Are received from 20%-or-more-owned
less-than-20%-owned foreign corporations that are included on line 1a.
corporations, and lines 2, 3, 5, 7, and 8 of column • Line 12b: Enter the pro rata share of
• Qualify for the 50% deduction under (a) . . . . . . . . . . . . . . . Subpart F inclusions attributable to hybrid
6. Subtract line 5 from line 1 . . dividends of tiered corporations under
section 245(a). To qualify for the 50% section 245A(e)(2). This should equal the
deduction, the corporation must own at 7. Multiply line 6 by 50%
(0.50) . . . . . . . . . . . . . U.S. shareholder's pro rata share of the
least 10% of the stock of the foreign 8. Subtract line 3 above from amount reported on Form(s) 5471,
corporation by vote and value. column (c) of line 9 . . . . . . Schedule I, line 1b.
9. Enter the smaller of line 7 or
Line 7, Column (a) line 8 . . . . . . . . . . . . . . • Line 12c: Enter all other amounts
included in income under section 951,
10. Dividends-received deduction which should equal the U.S. shareholder's
Enter the U.S.-source portion of dividends after limitation. Add lines 4 and pro rata share of the sum of the amounts
that are received from 9. (If this is less than line 9 of
20%-or-more-owned foreign corporations Schedule C, enter the smaller on lines 1(c), 1(d), 1(e), 1(f), 2, 3, and 4 of
and that qualify for the 65% deduction amount on line 6b, page 1, Form Schedule I of Form(s) 5471.
under section 245(a). 1120-IC-DISC, and in the margin
next to line 9 of Line 13, Column (a)
Schedule C.) . . . . . . . . .
Line 8, Column (a) Enter amounts included in income under
Enter dividends received from wholly the section 951A GlLTI provision from
owned foreign subsidiaries that are Line 10, Column (a) Form 8992, Part II, line 5. If you also have
a Form 5471 reporting requirement,
eligible for the 100% deduction under Enter the foreign-source portion of please attach Form 5471.
section 245(b). dividends that:
• Are received from specified
In general, the deduction under section 10%-owned foreign corporations (as Line 14, Column (a)
245(b) applies to dividends paid out of the defined in section 245A(b)), including gain Reserved for future use.
earnings and profits of a foreign from the sale of stock of a foreign
corporation for a tax year during which: corporation that is treated as a dividend Line 14, Column (c)
• All of its outstanding stock is owned for purposes of applying section 245A
(directly or indirectly) by the domestic under section 1248(a) and (j); and Reserved for future use.
corporation receiving the dividends, and • Qualify for the 100% deduction under
• All of its gross income from all sources section 245A excluding any hybrid Line 15, Column (a)
is effectively connected with the conduct dividends.
of a trade or business within the United Include the following.
• Dividends (other than capital gain
States. Line 11, Column (a) distributions reported on Schedule D
Enter foreign dividends not reportable on (Form 1120) and exempt-interest
Line 9, Column (c) line 3, 6, 7, 8, or 10 of column (a). dividends) that are received from RICs
Generally, line 9, column (c), may not • Include on line 11 any hybrid dividends and that are not subject to the 50%
exceed the amount from the following from a controlled foreign corporation deduction.
worksheet. However, in a year in which an (CFC). Hybrid dividends are generally • Dividends from tax-exempt
NOL occurs, this limitation does not apply dividends received from a CFC that would organizations.
even if the loss is created by the otherwise be reported on line 10 except • Dividends (other than capital gain
dividends-received deduction. See the CFC receives a deduction (or other tax distributions) received from a real estate
sections 172(d) and 246(b). benefit) with respect to any income, war investment trust that, for the tax year of the
profits, or excess profits taxes imposed by trust in which the dividends are paid,
any foreign country or possession of the qualifies under sections 856 through 860.
Line 9, Column (c) Worksheet United States. • Dividends not eligible for a
1. Refigure line 5, page 1, Form • Also include on line 11 the corporation's dividends-received deduction, which
1120-IC-DISC, without any share of distributions from a section 1291 include the following.
adjustment under section 1059 fund from Form 8621, to the extent that 1. Dividends received on any share of
and without any capital loss the amounts are taxed as dividends under stock held for less than 46 days during the
carryback to the tax year under section 301. See Form 8621 and the 91-day period beginning 45 days before
section 1212(a)(1) . . . . . . Instructions for Form 8621. the ex-dividend date. When counting the
2. Multiply line 1 by 65% number of days the corporation held the
(0.65) . . . . . . . . . . . . .

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stock, you may not count certain days Tangible personal property produced Golden parachute payments. A portion
during which the corporation's risk of loss by a corporation includes a film, sound of the payments made by a corporation to
was diminished. See section 246(c)(4) recording, videotape, book, or similar key personnel that exceeds their usual
and Regulations section 1.246-5 for more property. compensation may not be deductible. This
details. IC-DISCs subject to the section 263A occurs when the corporation has an
2. Dividends attributable to periods uniform capitalization rules are required to agreement (golden parachute) with these
totaling more than 366 days that the capitalize: key employees to pay them these excess
IC-DISC received on any share of 1. Direct costs of assets produced or amounts if control of the corporation
preferred stock held for less than 91 days acquired for resale, and changes. See section 280G and
during the 181-day period that began 90 Regulations section 1.280G-1. Also see
days before the ex-dividend date. When 2. Certain indirect costs (including the instructions for line 1i, later.
counting the number of days the IC-DISC taxes) that are properly allocable to
held the stock, you may not count certain property produced or property acquired for Election to deduct business start-up
days during which the IC-DISC's risk of resale. and organizational costs. A
corporation can elect to deduct a limited
loss was diminished. See section 246(c) For inventory, some of the indirect amount of start-up and organizational
(4) and Regulations section 1.246-5 for expenses that must be capitalized are: costs it paid or incurred. Any remaining
more details. Preferred dividends • Administration expenses; costs must generally be amortized over a
attributable to periods totaling less than • Taxes; 180-month period. See sections 195 and
367 days are subject to the 46-day holding • Depreciation; 248 and the related regulations.
period rule in item 1. • Insurance;
3. Dividends on any share of stock to • Compensation paid to officers Time for making an election. The
the extent the IC-DISC is under an attributable to services; corporation generally elects to deduct
obligation (including a short sale) to make • Rework labor; and start-up or organizational costs by
related payments with respect to positions • Contributions to pension, stock bonus, claiming the deduction on its income tax
in substantially similar or related property. and certain profit-sharing, annuity, or return filed by the due date (including
• Any other taxable dividend income not deferred compensation plans. extensions) for the tax year in which the
properly reported elsewhere on Regulations section 1.263A-1(e)(3) active trade or business begins. However,
Schedule C. specifies other indirect costs that relate to for start-up or organizational costs paid or
production or resale activities that must be incurred before September 9, 2008, the
Line 17, Column (c) capitalized and those that may be corporation is required to attach a
currently deductible. statement to its return to elect to deduct
Enter the section 250 deduction claimed such costs.
for FDII and GILTI. This should equal the Interest expense paid or incurred
sum of lines 8 and 9 of Form 8993, Part IV. during the production period of designated For more details, including special
property must be capitalized and is rules for costs paid or incurred before
governed by special rules. For more September 9, 2008, see the Instructions
Line 19, Column (a) details, see Regulations sections for Form 4562. Also see Pub. 535,
Qualified dividends are dividends that 1.263A-8 through 1.263A-15. Business Expenses.
qualify as qualified export receipts. They The costs required to be capitalized If the corporation timely filed its return
include all dividends (or amounts) under section 263A are not deductible for the year without making an election, it
includible in gross income (under section until the property (to which the costs can still make an election by filing an
951) that are attributable to stock of relate) is sold, used, or otherwise amended return within 6 months of the
related foreign export corporations. See disposed of by the corporation. The due date of the return (excluding
Qualified export receipts and A related corporation recovers these costs through extensions). Clearly indicate the election
foreign export corporation under Section depreciation, amortization, or cost of on the amended return and write "Filed
993, earlier, for more details. goods sold. pursuant to section 301.9100-2" at the top
of the amended return. File the amended
Schedule E Note. A small business taxpayer (defined return at the same address the corporation
earlier) is not required to capitalize costs filed its original return. The election
Deductions under section 263A. A small business applies when figuring taxable income for
Limitations on Deductions taxpayer that wants to discontinue the current tax year and all subsequent
capitalizing costs under section 263A years.
Section 263A uniform capitalization must change its method of accounting. The corporation can choose to forgo
rules. The uniform capitalization rules of See section 263A(i). Also see Change in the elections above by affirmatively
section 263A require corporations to accounting method, earlier. electing to capitalize its start-up or
capitalize, or include in inventory, certain For more details on the uniform organizational costs on its income tax
costs incurred in connection with the capitalization rules, see Regulations return filed by the due date (including
following. sections 1.263A-1 through 1.263A-3 and extensions) for the tax year in which the
• The production of real property and Pub. 538. active trade or business begins.
tangible personal property held in
inventory or held for sale in the ordinary Transactions between related taxpay- Note. The election to either amortize or
course of business. ers. Generally, an accrual basis taxpayer capitalize start-up costs is irrevocable and
• Real property or personal property may only deduct business expenses and applies to all start-up costs that are related
(tangible and intangible) acquired for interest owed to a related party in the year to the trade or business.
resale. the payment is included in the income of Report the deductible amount of
• The production of real property and the related party. See sections 163(e)(3) start-up and organizational costs and any
tangible personal property by a and 267(a)(2) for limitations on deductions amortization on line 2g of Schedule E. For
corporation for use in its trade or business for unpaid interest and expenses. amortization that begins during the current
or in an activity engaged in for profit.

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tax year, complete and attach Form 4562, deferred arrangement, or amounts Regulations sections 1.263A-8 through
Depreciation and Amortization. contributed under a salary reduction SEP 1.263A-15 for definitions and more
agreement or a SIMPLE IRA plan. information.
Limitations on deductions related to
property leased to tax-exempt entities. See the Instructions for Form 1125-E Special rules apply to the following.
If an IC-DISC leases property to a for more information on officers' • Forgone interest on certain
governmental or other tax-exempt entity, it compensation, including any special rules below-market-rate loans (see section
may not claim deductions related to the and limitations that may apply. 7872).
property to the extent that they exceed the
• Original issue discount on certain
IC-DISC's income from the lease The IC-DISC determines who is an high-yield discount obligations. See
payments (tax-exempt-use loss). Amounts officer under the laws of the state where it section 163(e) to figure the disqualified
disallowed may be carried over to the next is incorporated. portion.
tax year and treated as a deduction with
respect to the property for that tax year. • Interest which is allocable to
See section 470 for exceptions. Line 1m. Other Export Promotion unborrowed policy cash values of life
Expenses insurance, endowment, or annuity
Contributions. See the Instructions for contracts issued after June 8, 1997. See
Form 1120 and Pub. 542 for limitations Enter any other allowable export section 264(f). Attach a statement
that apply to contributions. promotion expenses not claimed showing the computation of the deduction.
elsewhere on the return.
Line 1. Export Promotion Note. Do not deduct fines or penalties Line 2d. Charitable Contributions
Expenses imposed on the IC-DISC. For more information on charitable
Enter export promotion expenses on lines contributions, including substantiation and
1a through 1m. Export promotion Line 2b. Taxes and Licenses recordkeeping requirements, see section
expenses are an IC-DISC's ordinary and 170 and the related regulations and Pub.
Enter taxes paid or accrued during the tax
necessary expenses paid or incurred to 526, Charitable Contributions. For
year, but do not include the following.
obtain qualified export receipts. Do not limitations on deduction and other special
rules that apply to corporations, see the
through 2g any part of an expense not •
include income taxes. Enter on lines 2a Taxes not imposed on the corporation. Instructions for Form 1120 and Pub. 542.
incurred to obtain qualified export • Taxes, including state or local sales
taxes, that are paid or incurred in
receipts. connection with an acquisition or Line 2e. Freight
disposition of property (these taxes must Enter freight expense not deducted on
Line 1d. Salaries and Wages be treated as part of the cost of the line 1h as export promotion expense.
Enter the total salaries and wages paid for acquired property or, in the case of a
the tax year. Do not include salaries and disposition, as a reduction in the amount
wages deductible elsewhere on the return, realized on the disposition). Line 2g. Other Expenses
such as amounts included in officers' • Taxes assessed against local benefits Enter any other allowable deduction not
compensation, cost of goods sold, that increase the value of the property claimed on line 1 or lines 2a through 2f.
elective contributions to a section 401(k) assessed (such as for paving, etc.).
cash or deferred arrangement, or amounts • Taxes deducted elsewhere on the The IC-DISC may have to report a
contributed under a salary reduction SEP return, such as those reflected in cost of negative section 481(a) adjustment on
agreement or a SIMPLE IRA plan. goods sold. line 2g. See Section 481(a) adjustment,
earlier, for additional information.
If the corporation provided taxable See section 164(d) for apportionment
! fringe benefits to its employees, of taxes on real property between seller Generally, a deduction may not be
CAUTION such as personal use of a car, do and purchaser. taken for any amount that is allocable to a
not deduct as wages the amount allocated class of exempt income. See section
for depreciation and other expenses Line 2c. Interest 265(b) for exceptions.
claimed on lines 1c and 1m.
Do not deduct the following interest. Note. Do not deduct fines or penalties
• Interest on indebtedness incurred or paid to a government for violating any law.
Line 1h. Freight continued to purchase or carry obligations
Enter 50% of the freight expenses (except if the interest is wholly exempt from For more information on other
insurance) for shipping export property income tax. For exceptions, see section deductions that may apply to corporations,
aboard U.S. flagships and U.S.-owned 265(b). see Pub. 535.
and U.S.-operated aircraft in those cases • For cash basis taxpayers, prepaid
where you are not required to use U.S. interest allocable to years following the Schedule J
ships or aircraft by law or regulations. current tax year (for example, a cash basis
calendar year taxpayer who in the current Part I—Deemed Distributions
tax year prepaid interest allocable to any Under Section 995(b)(1)
Line 1i. Compensation of Officers period after the current tax year may Line 2. Recognized Gain on
Enter deductible officers' compensation deduct only the amount allocable to the
on line 1i. Attach a statement showing the current tax year). Section 995(b)(1)(B) Property
name, social security number, and amount • Interest on debt allocable to the Enter gain recognized during the tax year
of compensation paid to all officers. Do production of designated property by a on the sale or exchange of property, other
not include compensation deductible corporation for its own use. The than property which in the hands of the
elsewhere on the return, such as amounts corporation must capitalize this interest. IC-DISC was a qualified export asset,
included in cost of goods sold, elective Also capitalize any interest on debt previously transferred to the IC-DISC in a
contributions to a section 401(k) cash or allocable to an asset used to produce the transaction in which the transferor realized
property. See section 263A(f) and gain but did not recognize the gain in

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whole or in part. See section 995(b)(1)(B). Line 14. Earnings and Profits Line 1. Export Receipts
Show the computation of the gain on a
separate statement. Include no more of Attach a computation showing the If there were no commission sales, leases,
the IC-DISC's gain than the amount of earnings and profits for the tax year. See rentals, or services for the tax year, enter
gain the transferor did not recognize on section 312 for rules on figuring earnings on Part II, line 1, the total of lines 1c and
the earlier transfer. and profits for the purpose of the section 2k, column (e), of Schedule B.
995(b)(1) limitation.
If there were commission sales, leases,
Line 3. Recognized Gain on rentals, or services for the tax year, the
Line 17. Foreign Investment
Section 995(b)(1)(C) Property total qualified export receipts to be
Attributable to Producer Loans
Enter gain recognized on the sale or entered on Part II, line 1, are figured as
exchange of property described in section Line 17a. For shareholders other than follows (section 993(f)):
995(b)(1)(C). Show the computation of the C corporations. To figure the amount for
gain on a separate statement. Do not line 17a, attach a computation showing (1) Line 1, Export Receipts
include any gain included in the the IC-DISC's foreign investment in Worksheet
computation of line 2. Include only the producer's loans during the tax year; (2)
amount of the IC-DISC's gain that the accumulated earnings and profits 1. Add lines 1c and 2k, column (b),
transferor did not recognize on the earlier (including earnings and profits for the Schedule B . . . . . . . . . . .
transfer and that would have been treated current tax year) minus the amount on Part 2. Add lines 1c and 2k, column (d),
as ordinary income if the property had I, line 15; and (3) accumulated IC-DISC Schedule B . . . . . . . . . . .
been sold or exchanged rather than income. Enter the smallest of these 3. Add lines 1 and 2. Enter on
transferred to the IC-DISC. Do not include amounts (but not less than zero) on Schedule J, Part II, line 1. . . .
gain on the sale or exchange of IC-DISC line 17a.
stock-in-trade or other property that either Line 17b. For C corporation sharehold- Line 3. Controlled Group
would be included in inventory if on hand ers. To figure the amount for line 17b, Allocation
at the end of the tax year or is held attach a computation showing (1) the
primarily for sale in the normal course of IC-DISC's foreign investment in producer's If the IC-DISC is a member of a controlled
business. loans during the tax year; (2) accumulated group (as defined in section 993(a)(3))
earnings and profits (including earnings that includes more than one IC-DISC, only
Line 4. Income Attributable to and profits for the current tax year) minus one $10 million limit is allowed to the
Military Property the amount on Part I, line 16; and (3) group. If an allocation is required, a
accumulated IC-DISC income. Enter the statement showing each member's portion
Enter 50% of taxable income attributable smallest of these amounts (but not less of the $10 million limit must be attached to
to military property (section 995(b)(1)(D)). than zero) on line 17b. Form 1120-IC-DISC. See Proposed
Show the computation of this income. To Regulations section 1.995-8(f) for details.
figure taxable income attributable to For purposes of lines 17a and 17b,
military property, use the gross income foreign investment in producer's loans is
attributable to military property for the year the smallest of (1) the net increase in Lines 4 and 5. Proration of $10
and the deductions properly allocated to foreign assets by members of the Million Limit
that income. See Regulations section controlled group (defined in section 993(a)
1.995-6. (3)) to which the IC-DISC belongs, (2) the The $10 million limit (or the controlled
actual foreign investment by the group's group member's share) is prorated on a
domestic members, or (3) the IC-DISC's daily basis. Thus, for example, if, for its
Line 9. Deemed Distributions to C outstanding producer's loans to members 2019 calendar tax year, an IC-DISC has a
Corporations of the controlled group. short tax year of 73 days, and it is not a
member of a controlled group, the limit
Line 9 provides for the computation of the Net increase in foreign assets and that would be entered on Part II, line 5, is
one-seventeenth deemed distribution of actual foreign investment are defined in $2 million (73/365 times $10 million).
section 995(b)(1)(F)(i). Line 9 only applies sections 995(d)(2) and (3).
to shareholders of the IC-DISC that are C See Regulations section 1.995-5 for Line 7. Taxable Income
corporations. additional information on figuring foreign
investment attributable to producer's Enter the taxable income attributable to
Line 10. International Boycott loans. line 6, qualified export receipts. The
IC-DISC may select the qualified export
Income Lines 20 and 21. The percentages on receipts to which the line 5 limitation is
An IC-DISC is deemed to distribute any lines 20 and 21 must add up to 100%. allocated.
income that resulted from cooperating with Line 22. Allocate the line 22 amount to
an international boycott (section 995(b)(1) shareholders that are individuals, See Proposed Regulations section
(F)(ii)). See Form 5713 to figure this partnerships, S corporations, trusts, and 1.995-8 for details on determining the
deemed distribution and for reporting estates. IC-DISC's taxable income attributable to
requirements for any IC-DISC with qualified export receipts in excess of the
operations related to a boycotting country. Part II—Section 995(b)(1)(E) $10 million amount. Special rules are
Taxable Income provided for allocating the taxable income
Line 11. Illegal Bribes, etc. Generally, any taxable income of the attributable to any related and subsidiary
An IC-DISC is deemed to distribute the IC-DISC attributable to qualified export services, and for the ratable allocation of
amount of any illegal payments, such as receipts that exceed $10 million will be the taxable income attributable to the first
bribes or kickbacks, that it pays, directly or deemed distributed. transaction selected by the IC-DISC that
exceeds the $10 million amount.
indirectly, to government officials, Deductions must be allocated and
employees, or agents (section 995(b)(1) apportioned according to the rules of
(F)(iii)). Regulations section 1.861-8. The

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selection of the excess receipts by the Line 4a. Previously Taxed Income Schedule L
IC-DISC is intended to permit the IC-DISC
to allocate the $10 million limitation to the Report on line 4a all actual distributions of Balance Sheets per Books
qualified export receipts of those previously taxed income. Also, include any
transactions occurring during the tax year distributions of pre-1985 accumulated The balance sheet should agree with the
that permit the greatest amount of taxable DISC income that are nontaxable (see the IC-DISC's books and records. Include
income to be allocated to the IC-DISC instructions for Schedule L, line 12, later). certificates of deposits as cash on line 1.
under the intercompany pricing rules of Enter on the dotted line to the left of the
section 994. line 4a amount the dollar amount of the Line 12. Accumulated Pre-1985
distribution that is nontaxable pre-1985 DISC Income
DISC income and identify it as such. Do
To avoid double counting of the not include distributions of pre-1985 DISC If the corporation was a qualified DISC as
deemed distribution, if an amount of income that are made under section of December 31, 1984, the accumulated
taxable income for the tax year attributable 995(b)(2) because of prior year pre-1985 DISC income will generally be
to excess qualified export receipts is also revocations or disqualifications. treated as previously taxed income
deemed distributed under either line 1, 2, (exempt from tax) when distributed to
3, or 4 of Part I, such amount of taxable Part V—Deferred DISC Income DISC shareholders after December 31,
income is only includible on that line of Under Section 995(f)(3) 1984.
Part I, and must be subtracted from the
amount otherwise reportable on Part II, In general, deferred DISC income is: Exception. The exemption does not
line 7, and carried to Part I, line 5. See 1. Accumulated IC-DISC income (for apply to distributions of accumulated
Proposed Regulations section 1.995-8(d). periods after 1984) of the IC-DISC as of pre-1985 DISC income of an IC-DISC or
the close of the computation year, over former DISC that was made taxable under
After filing the IC-DISC's current year 2. The amount of section 995(b)(2) because of a prior
tax return, the allocation of the $10 million distributions-in-excess-of-income for the revocation of the DISC election or
limitation and the computation of the line 7 tax year of the IC-DISC following the disqualification of the DISC. For more
deemed distribution may be changed by computation year. details on these distributions, see
filing an amended Form 1120-IC-DISC Temporary Regulations section
only under the conditions specified in Note. For purposes of item 2, 1.921-1T(a)(7).
Proposed Regulations section 1.995-8(b) distributions-in-excess-of-income means
(1). the excess (if any) of: Line 13. Accumulated IC-DISC
• Actual distributions to shareholders out
Part III—Deemed Distributions of accumulated IC-DISC income, over Income
Under Section 995(b)(2) • The amount of IC-DISC income (as Accumulated IC-DISC income (for periods
If the corporation is a former DISC or a defined in section 996(f)(1)) for the tax after 1984) is accounted for this line. The
former IC-DISC that revoked IC-DISC year following the computation year. balance of this account is used in figuring
status or lost IC-DISC status for failure to deferred DISC income in Part V of
satisfy one or more of the conditions Note. For purposes of items 1 and 2, see Schedule J.
specified in section 992(a)(1) for the section 995(f) and Proposed Regulations
current tax year, each shareholder is section 1.995(f)-1 for a definition of Schedule N
deemed to have received a distribution computation year, examples, and other
taxable as a dividend on the last day of the details on figuring deferred DISC income. Export Gross Receipts
current tax year. The deemed distribution The amount on Part V, line 3, is of the IC-DISC and Related U.S.
equals the shareholder's prorated share of allocated to each shareholder on Part III, Persons
the DISC's or IC-DISC's income line 10, of Schedule K (Form
Line 1. Product Code and
accumulated during the years just before 1120-IC-DISC).
DISC or IC-DISC status ended. The Percentage
shareholder will be deemed to receive the Shareholders of an IC-DISC must file
distribution in equal parts on the last day Form 8404 if the IC-DISC reports deferred Enter on line 1a the code number and
of each of the 10 tax years of the DISC income on Schedule K, Part III, percentage of total export gross receipts
corporation following the year of the line 10. (defined under Line 2. Definitions, later)
for the product or service that accounts for
termination or disqualification of the the largest portion of the IC-DISC's export
IC-DISC (but in no case over more than Schedule K (Form gross receipts. The product codes are at
twice the number of years the corporation 1120-IC-DISC) the end of these instructions. On line 1b,
was a DISC or IC-DISC). enter the same information for the
Shareholder's Statement of
Part IV—Actual Distributions IC-DISC's next largest product or service.
IC-DISC Distributions Example. An IC-DISC has export
Line 1. Distributions To Meet Attach a separate Copy A, Schedule K gross receipts of $10 million. Selling
Qualification Requirements Under (Form 1120-IC-DISC), to Form agricultural chemicals accounts for $4.5
Section 992(c) 1120-IC-DISC for each shareholder who million (45% (0.45)) of that amount, which
received an actual or deemed distribution is the IC-DISC's largest product or service.
If the corporation is required to pay during the tax year or to whom the The IC-DISC should enter “287” (the
interest under section 992(c)(2)(B) on the corporation reported deferred DISC product code for agricultural chemicals)
amount of a distribution to meet the income for the tax year. and “45%” on line 1a.
qualification requirements of section
992(c), report this interest on Schedule E, Selling industrial chemicals accounts
line 2c. Also include the amount on for $2 million (20% (0.20) of the $10
Schedule J, Part IV, line 1, and show the million total) and is the IC-DISC's
computation of the interest on an attached second-largest product or service. The
statement. IC-DISC should enter “281” (the product

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code for industrial inorganic and organic Complete column (a) to report the or prior year carryover, excess business
chemicals) and “20%” on line 1b. IC-DISC's export gross receipts from all interest expense allocated from the
sources (including the United States) for partnership.
Line 2. Definitions the current tax year.
Exclusions from filing. A taxpayer is
Export gross receipts are receipts from Column (b). Export gross receipts of not required to file Form 8990 if the
any of the following. related IC-DISCs. Complete column (b) taxpayer is a small business taxpayer and
• Providing engineering or architectural to report related IC-DISCs' export gross does not have excess business interest
services for construction projects located receipts from all sources (including the expense from a partnership. A taxpayer is
outside the United States. United States). also not required to file Form 8990 if the
• Selling for direct use, consumption, or Column (c). Export gross receipts of taxpayer only has business interest
disposition outside the United States, all other related U.S. persons. expense from these excepted trades or
property (such as inventory) produced in Complete column (c) to report other businesses:
the United States. related U.S. persons' export gross • An electing real property trade or
• Renting this property to unrelated receipts from all sources except the business,
persons for use outside the United States. United States. • An electing farming business, or
• Providing services involved in such a • Certain utility businesses.
sale or rental. Small business taxpayer. A small
• Providing export management services. Line 3. Related U.S. Persons
business taxpayer is not subject to the
Enter on line 3 the name, address, and business interest expense limitation and is
For commission sales, export gross identifying number of related U.S. persons not required to file Form 8990. A small
receipts include the total receipts on which in your controlled group. business taxpayer is a taxpayer that (a) is
the IC-DISC earned the commission. not a tax shelter (as defined in section
Schedule O 448(d)(3)), and (b) meets the gross
For purposes of line 2, Schedule N receipts test of section 448(c), discussed
only, no reduction is to be made for Other Information
next.
receipts attributable to military property. Question 6. Boycott of Israel. If
Therefore, an IC-DISC's export gross question 6a, 6b, or 6c is checked “Yes,” Gross receipts test. A taxpayer
receipts for purposes of line 2 include the the IC-DISC must file Form 5713 and is meets the gross receipts test if the
total of the amounts from Schedule B, also deemed to distribute part of its taxpayer has average annual gross
columns (b) and (d) of lines 1c, 2a, 2b, 2c, income. See Form 5713 for more receipts of $26 million or less for the 3
and 2d. information. prior tax years. A taxpayer's average
annual gross receipts for the 3 prior tax
Question 7. Limitation on business in- years is determined by adding the gross
Related persons are: terest expense. For tax years beginning receipts for the 3 prior tax years and
• An individual, partnership, estate, or after 2017, the limitation on business dividing the total by 3. Gross receipts
trust that controls the IC-DISC; interest expense applies to every taxpayer include the aggregate gross receipts from
• A corporation that controls the IC-DISC with a trade or business, unless the all persons treated as a single employer,
or is controlled by it; or taxpayer meets certain specified such as a controlled group of
• A corporation controlled by the same exceptions. A taxpayer may elect out of corporations, commonly controlled
person or persons who control the the limitation for certain businesses partnerships, or proprietorships, and
IC-DISC. otherwise subject to the business interest affiliated service groups. See section
expense limitation. 448(c) and the Instructions for Form 8990
Control means direct or indirect for additional information.
ownership of more than 50% of the total Certain real property trades or
voting power of all classes of stock businesses and farming businesses Question 9. Tax-exempt interest.
entitled to vote. See section 993(a)(3). qualify to make an election not to limit Report any tax-exempt interest received
business interest expense. This is an or accrued. Include any exempt-interest
irrevocable election. If you make this dividends received as a shareholder in a
U.S. person is: election, you are required to use the mutual fund or other RIC.
• A citizen or resident of the United alternative depreciation system to
States, which includes the Commonwealth depreciate any property with a recovery Question 10. Foreign owner. If the
of Puerto Rico and possessions of the period of 10 years or more. Also, you are answer to question 10(a) or 10(b) is "Yes,"
United States; not entitled to the special depreciation enter on line 10(b)a the percentage
• A domestic corporation or partnership; allowance for that property. For a taxpayer owned. On line 10(b)b, enter the owner's
or with more than one qualifying business, country, and on line 10(b)c, if Form 5472,
• An estate or trust (other than a foreign the election is made with respect to each Information Return of a 25%
estate or trust as defined in section business. Foreign-Owned U.S. Corporation
7701(a)(31)). Engaged in a U.S. Trade or Business, is
Check “Yes” if the taxpayer has an filed by the corporation, enter the number
election in effect to exclude a real property of Forms 5472 attached.
Export Gross Receipts trade or business or a farming business
Column (a). All IC-DISCs should from section 163(j). For more information,
complete column (a) in line 2. If two or see section 163(j) and the Instructions for Schedule P (Form
more IC-DISCs are related persons, only Form 8990. 1120-IC-DISC)
the IC-DISC with the largest export gross Question 8. Form 8990. Generally, a Intercompany Transfer Price or
receipts should complete columns (b) and taxpayer with a trade or business must file
(c). If an IC-DISC acts as a commission Form 8990 to claim a deduction for Commission
agent for a related person, attribute the business interest. In addition, Form 8990 Complete and attach a separate
total amount of the transaction to the must be filed by any taxpayer that owns an Schedule P (Form 1120-IC-DISC) for each
IC-DISC. interest in a partnership with current year, transaction or group of transactions to

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which you apply the intercompany pricing
rules of section 994(a)(1) and (2).

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.
The time needed to complete and file Form 1120-IC-DISC, Schedule K (Form 1120-IC-DISC), and Schedule P (Form
1120-IC-DISC), will vary depending on individual circumstances. The estimated burden for business taxpayers filing these forms is
approved under OMB control number 1545-0123.
If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler, we would
be happy to hear from you. You can send us comments through IRS.gov/FormComments. Or you can write to: Internal Revenue
Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Don't send the tax forms to this
address. Instead, see Where To File, earlier, near the beginning of these instructions.

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -15-

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Form 1120-IC-DISC Codes for Principal Business Activity

This list of principal business activities and their associated codes is                       total gross receipts is derived. Total receipts means all income (line
designed to classify an enterprise by the type of activity in which it is                      1, page 1).
engaged to facilitate the administration of the Internal Revenue                                   On page 6, Schedule O, line 1, enter the principal business activity
Code. These principal business activity codes are based on the                                 and principal product or service that account for the largest
North American Industry Classication System. Certain activities,                              percentage of total receipts. For example, if the principal activity is
such as manufacturing, do not apply to an IC-DISC.                                             “Wholesale Trade Durable Goods: Machinery, Equipment, &
Using the list below, enter on page 1, item B, the code number for                             Supplies,” the principal product or service may be “Engines and
the specic industry group from which the largest percentage of                                Turbines.”
Wholesale Trade                                            Code                                Code                                      Rental and Leasing
Code                                                       424210 Drugs & Druggists’ Sundries  Motion Picture and Sound                  Code
Merchandise Wholesalers, Durable                           424300 Apparel, Piece Goods, &      Recording Industries                      Rental and Leasing Services
                                                                Notions                        512100 Motion Picture & Video
Goods                                                      424400 Grocery & Related Products            Industries (except video         532100 Automotive Equipment Rental
423100 Motor Vehicle & Motor                               424500 Farm Product Raw Materials            rental)                                & Leasing
        Vehicle Parts & Supplies                           424600 Chemical & Allied Products   512200 Sound Recording Industries         532210 Consumer Electronics &
423200 Furniture & Home Furnishings                        424700 Petroleum & Petroleum                                                        Appliances Rental
                                                                                               Broadcasting (except Internet)            532281 Formal Wear & Costume
423300 Lumber & Other Construction                              Products                       515100 Radio & Television                       Rental
        Materials                                          424800 Beer, Wine, & Distilled               Broadcasting                     532282 Video Tape & Disc Rental
423400 Professional & Commercial                                Alcoholic Beverage             515210 Cable & Other Subscription         532283   Home Health Equipment
        Equipment & Supplies                               424910 Farm Supplies                         Programming                            Rental
423500 Metal & Mineral (except                             424920 Book, Periodical, &                                                    532284   Recreational Goods Rental
        Petroleum)                                              Newspapers                     Telecommunications                        532289   All Other Consumer Goods
423600 Household Appliances &Electrical & Electronic Goods 424930 Flower, Nursery Stock, &     517000 Telecommunications                       Rental
423700 Hardware, & Plumbing &                                   Florists’ Supplies                      (including paging, cellular,     532310 General Rental Centers
        Heating Equipment, & Supplies                      424940 Tobacco & Tobacco Products            satellite, cable & other         532400 Commercial & Industrial
423800 Machinery, Equipment, &                             424950 Paint, Varnish, & Supplies            program distribution,                  Machinery & Equipment
        Supplies                                           424990 Other Miscellaneous                   resellers, other                       Rental & Leasing
423910 Sporting & Recreational Goods                            Nondurable Goods                        telecommunications, &
                                                                                                        internet service providers)
        & Supplies                                         Information                                                                   Professional Services
423920 Toy & Hobby Goods & Supplies                        Publishing Industries (except       Data Processing Services                  Architectural, Engineering, and
423930 Recyclable Materials                                Internet)                           518210 Data Processing, Hosting, &        Related Services 
423940 Jewelry, Watch, Precious                            511110 Newspaper Publishers                  Related Services                 541310 Architectural Services
        Stone, & Precious Metals                           511120 Periodical Publishers        Other Information Services                541320 Landscape Architecture
423990 Other Miscellaneous Durable                         511130 Book Publishers              519100 Other Information Services               Services
        Goods                                              511140 Directory & Mailing List              (including news syndicates,      541330 Engineering Services
Merchandise Wholesalers,                                        Publishers                              libraries, internet publishing & 541340 Drafting Services
Nondurable Goods                                           511190 Other Publishers                      broadcasting)                    541350 Building Inspection Services
424100 Paper & Paper Products                              511210 Software Publishers                                                    541360 Geophysical Surveying &
                                                                                                                                               Mapping Services
                                                                                                                                         541370 Surveying & Mapping (except
                                                                                                                                               Geophysical) Services
                                                                                                                                         541380 Testing Laboratories
                                                                                                                                         Other Professional Services
                                                                                                                                         541600 Management, Scientic, & 
                                                                                                                                               Technical Consulting Services

Schedule P (Form 1120-IC-DISC) Codes for Principal Business Activity
(These codes are used only with Schedule P (Form 1120-IC-DISC)).                                   Using the list below, enter on each Schedule P, the code for the
These codes for the Principal Business Activity are designed to                                specic industry group and the product or product line for which the
classify enterprises by the type of activity in which they are engaged                         Schedule P is completed.
to facilitate the administration of the Internal Revenue Code. Certain
activities such as manufacturing do not apply to an IC-DISC.
Transportation,                                            Code                                Retail Trade                              Finance, Insurance, and Real
Communication, Electric,                                   5040 Sporting, recreational,        Code                                      Estate
Gas, and Sanitary Services                                      photographic, and hobby        Building materials, hardware, garden      Code
Code                                                            goods, toys, and supplies      supply, mobile home dealers,
Transportation                                             5050 Metals and minerals, except    general merchandise, and food             Credit agencies other than banks
4400 Water transportation                                       petroleum and scrap            stores                                    6199 Other credit agencies
4700 Other transportation services                         5060 Electrical goods               5220 Building materials dealers
                                                           5070 Hardware, plumbing and heating 5251 Hardware stores                      Services
Electric, gas, and sanitary services                            equipment                      5265 Garden supplies and mobile           Business services
4910 Electric services                                     5098NondurableOther durable goods   5300 General merchandise stores           7389 Export management services
                                                                                                        home dealers
4920 Gas production and distribution
4930 Combination utility services                          5110 Paper and paper products       5410 Grocery stores                       Auto repair and services;
                                                           5129 Drugs, drug proprietaries, and 5490 Other food stores                    miscellaneous repair services
Wholesale Trade                                                 druggists’ sundries            Automotive dealers and service            7500 Lease or rental of motor
Durable                                                    5130 Apparel, piece goods, and      stations                                        vehicles
5008 Machinery, equipment, and                                  notions                        5515 Motor vehicle dealers
        supplies                                           5140 Groceries and related products 5541 Gasoline service stations            Amusement and recreation services
5010 Motor vehicles and automotive                         5150 Farm-product raw materials     5598 Other automotive dealers             7812 Motion picture production,
        equipment                                          5160 Chemicals and allied products  5600 Apparel and accessory stores               distribution, and services
5020 Furniture and home furnishings                        5170 Petroleum and petroleum        5700 Furniture and home furnishings       Other services
5030 Lumber and construction                                    products                                stores                           8911 Architectural and engineering
        materials                                          5180 Alcoholic beverages            5800 Eating and drinking places                 services
                                                           5190 Miscellaneous nondurable       Miscellaneous retail stores               8930 Accounting, auditing, and
                                                                goods                          5912 Drug stores and proprietary                bookkeeping
                                                                                                        stores                           8980 Miscellaneous services
                                                                                               5921 Liquor stores
                                                                                               5995 Other miscellaneous retail stores

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Schedule N Product Code System
(These codes are used only with Schedule N, page 6, Form 1120-IC-DISC.)
Using the list below, enter on line 1 of Schedule N the product code number and percent of export gross receipts as explained in
the Speciﬁc Instructions.
This product code system is divided into two categories—nonmanufactured product groups and services, and manufactured
product groups.
Code                                                    Code                                                   Code
Nonmanufactured Product Groups and Services             Furniture and ﬁxtures                                  Fabricated metal products (except ordnance, 
011  Grains, including soybeans                         251  Household furniture                               machinery and transportation)
012  Vegetables and melons                              252  Ofce furniture                                   341 Metal cans
013  Fruit and tree nuts                                253  Public building and related furniture             342 Cutlery, hand tools, and general hardware
014  Greenhouse, nursery, and oriculture               259  Other furniture and xtures                       343 Heating apparatus (except electric) and plumbing
015  Cotton                                                                                                        xtures
019  Other crops (including sugar beets, peanuts,       Paper and allied products                              344 Fabricated structural metal products
     spices, hops, and vegetable seeds)                 261  Pulp                                              345 Screw machine products and bolts, nuts, screws,
021  Livestock                                          262  Newsprint                                             rivets, and washers
022  Poultry and eggs                                   263  Business machine paper                            346 Metal stampings
023  Fishery products and services (including shellsh) 264  Stationery and ofce supplies (including pens     347 Coated and engraved metal products
024  Fur bearing animals and unnished hides                 and pencils)                                      349 Other fabricated metal products
029                                                     265
     Iron ores                                               Paper bags and coated and treated paper
101  Other animal products                              266  Paperboard (including containers and boxes)       Machinery (except electrical and electronic)
102  Precious metals (including gold and silver)             (including wallpaper and gift wrap)               351 Engines and turbines
103  Other ores                                         269  Other paper and allied products                   352 Farm machinery and equipment
110  Coal mining products                                                                                      353 Construction, mining, and materials handling
130  Secondary petroleum and natural gas products       Printed media                                              machinery and equipment
147  Nonmetallic mineral products and services          271  Newspapers                                        354 Metalworking machinery and equipment
     (including limestone, sulfur, and fertilizer)      272  Periodicals                                       355 Special industry machinery (except metalworking
148  Sand, gravel, and clay                             273  Books                                                 machinery)
730  Export management services                         274  Greeting cards                                    356 General industrial machinery and equipment
737  Computer software                                  275  Manifold business forms                           357 Service industry machinery
780  Motion picture distribution                        279  Other printed media                               359 Other machinery (except electrical and electronic)
850  Engineering and architectural services
988  Leasing--other property (except aircraft)          Chemicals and allied products                          Electrical and electronic machinery, equipment, and
990  Other nonmanufactured products                     281  Industrial inorganic and organic chemicals        supplies
Manufactured Product Groups                             282  Plastics materials, synthetic resins, synthetic   361 Electric power transmission and distribution
                                                             rubber, and synthetic bers                           equipment (including transformers, motors and
Ordnance and accessories                                283  Drugs                                                 generators)
191  Guns, howitzers, mortars, and related equipment    284  Soap, detergents, and cleaning preparations,      362 Electrical ofce equipment (including
192  Ammunition (except small arms)                          perfumes, cosmetics, and toiletries                   photocopying machines and calculators)
194  Sighting and re control equipment                 285  Paints, varnishes, lacquers, enamels, and allied  363 Household appliances
195  Small arms                                              products                                          364 Electric lighting and wiring equipment
196  Small arms ammunition                              286  Gum and wood chemicals                            365 Audio and video equipment (except
199  Other ordnance and accessories                     287  Agricultural chemicals                                communication types)
                                                        289  Other chemicals and allied products               366 Communication equipment
Food and kindred products                                                                                      367 Semiconductors, capacitors, resistors, and other
201  Meat products                                      Reﬁned petroleum and related products                      electronic components
202  Dairy products                                     291  Rened petroleum                                  368 Computer and peripheral equipment
203  Fruits, vegetables, and seafood                    295  Paving and roong materials                       369 Other electrical and electronic machinery,
204  Grain mill products                                299  Other petroleum and related products                  equipment, and supplies
205  Bakery products                                                                                           Transportation equipment
206  Sugar                                              Rubber and plastics products
207  Confectionery and related products                 301  Tires and inner tubes                             371 Motor vehicles and motor vehicle equipment
208  Beverages                                          302  Rubber footwear                                   372 Aircraft and aircraft parts and equipment
209  Other food and kindred products                    303  Reclaimed rubber                                  373 Leased aircraft
Tobacco products                                        306  Fabricated rubber products                        374 Ships and nautical equipment
                                                        309  Other rubber and plastics products                375 Railroad equipment
211  Cigarettes                                                                                                376 Motorcycles, bicycles, and parts
212  Cigars                                             Leather and leather products                           378 Tanks and tank components
213  Tobacco (chewing and smoking) and snuff            311  Tanned and nished leather                        379 Other transportation equipment
Textile mill products                                   312  Industrial leather belting and packing            Professional, scientiﬁc, and controlling instruments;
                                                        313  Boot and shoe cut stock and ndings               photographic and optical goods; watches and clocks
221                                                     314
222  Broad woven cotton fabrics                         315  Leather footwear                                  381 Engineering, laboratory, and scientic and
223  Broad woven synthetic bers and silk fabrics       316  Leather gloves and mittens                        382 research instruments and associated equipment
224  Broad woven wool fabrics                           317  Leather luggage                                       Instruments for measuring, controlling, and
225  Narrow fabrics                                          Leather handbags and other personal leather           indicating physical characteristics
226  Knit fabrics                                       319  goods                                             383 Optical instruments, lenses, binoculars,
     Carpets and rugs
227  Dyed and nished textiles                               Other leather and leather products                    microscopes, telescopes, and prisms
228  Yarns and threads                                  Stone, clay, glass, and concrete products              384 Surgical, medical, and dental instruments and
229  Other textile goods                                321  Flat glass                                        385 supplies
Apparel and other ﬁnished goods                         322  Glass and glassware, pressed and blown            386 Ophthalmic goods
                                                        323  Glass products, made or purchased glass               Photographic equipment and supplies
231  Men’s and boys’ clothing and furnishings           324  Cement, hydraulic                                 387 Watches and clocks
233  Women’s, children’s and infants’ clothing and      325  Structural clay products                          Other manufactured products
                                                        326
238  accessories (including fur goods and millinery)    327  Pottery and related products                      391 Jewelry, silverware, and plated ware
239  Footwear (except rubber and leather)               328  Concrete, gypsum, and plaster products            393 Musical instruments
     Other apparel and accessories                      329  Cut stone and stone products                      394 Toys, amusement, sporting, and athletic goods
Lumber and wood products (except furniture)                  Abrasive, asbestos, and other nonmetallic mineral 395 Artists’ materials
                                                             products                                              Costume jewelry, costume novelties, buttons,
241  Logs and log products                              Primary and secondary nonfabricated metal products     396 and other notions (except precious metal)
243  Lumber construction materials (including                                                                  399 Other manufactured products
     millwork, veneer, plywood and prefabricated        331  Iron and steel products
     structural wood products)                          332  Nonferrous metal products
244  Wooden containers                                  339  Other primary and secondary nonfabricated metal
249  Other lumber and wood products                          products

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