Astute exporters are beginning
to develop plans to replace their extraterritorial income (EI)
program with a Domestic International Sales Corporation (DISC)
structure.1 Measures before the U.S. Congress, if enacted, would
repeal that EI program; leaving exporters with DISC as the only
remaining export tax incentive. The EI repeal provisions are now
high on the agendas of both the Senate through the Jump-start
Our Business Strength (JOBS) Act (5.1637) and the House of Representatives
through the American Jobs Creation Act (H.R.2896). This article
specifically addresses DISC benefits from providing managerial
services to other DISCS.
How the DISC: Provisions
Apply
Managerial Services Benefits
Providing managerial
services is an important DISC facet, providing the DISC with potentially
high profit gross receipts. The DISC managerial services provisions
CodeSec.993(a)(1 )(H) provide the DISC with limited guidance"
Reg. §1.993-1 (i) provides the detail for these managerial
service benefits.
DISC Statutory. Provisions
Management service provisions can apply tQ DISCs management service
provisions are part of a complex DISC structure that includes
statutes, regulations, rulings, cases, and legislative history
going back more than 30 years.2 .The managerial services provisions
often-intricate DISC provisions.
As a general matter, Code Sec. 992(a)(1) establishes the basic
parameters for DISC status. Code Sec. 992(a)(1 )(A) imposes, as
one these parameters; a requirement that 95 percent of the DISC's
gross receipts consist of export gross receipts. Code Sec. 993(a)(1)(H)
provides that export gross receipts includes "gross receipts
for the performance of
