WHICH PROPERTY OR SERVICES QUALIFY?
Many eligible scenarios are often overlooked as taxpayers assume they need to manufacture and export to qualify. Our experts assure that no opportunity to capture savings for your company or clients is missed.
PROPERTY GENERAL CRITERIA (ALL FOUR MUST BE MET)
Expected Use Outside of the United StatesProperty must typically be expected to be used or consumed outside of the United States and must leave within one year, after its sale, lease, or license. Taxpayer friendly exceptions exist for items such as component parts and transportation property. Taxpayer does not need to be the exporter. Export incentive regulations specify a satellite in outer space as an item used outside of the United States.
Foreign Content Limitation
No more than 50% of the item’s value (sales price) may be comprised of foreign articles (valued at importation).
At Least Partial U.S. Production
Manufactured or produced property must be at least partially made in the United States. If 20% or more of an item’s COGS are attributable to U.S. labor and factory burden (collectively, and inclusive of factory overhead, packaging and assembly) the item meets this requirement. Taxpayer need not perform the manufacturing or production activities to benefit. Thus, a manufacturer, and subsequent distributor, of the same property can both qualify. Similarly, licenses of software substantially developed in the U.S. can qualify to the extent users are located abroad.
Further U.S. Processing Prohibition
Products that are further manufactured, processed, or used by another party in the U.S., after sale, lease or license but before leaving the U.S. are not able to generate DISC commission. Packaging and light assembly, however, may be performed by another party without interfering in the initial producer’s ability to claim DISC commission.
AGRIBUSINESS AND MINING QUALIFICATION RULES:
Sales of agricultural products such as produce, crops, livestock, etc. generally qualify if ultimately used outside of the United States. The items must be grown or extracted in the United States. Farmers and growers of such products, as well as subsequent distributors of the same items, can both enjoy DISC savings in most cases.
Sales of minerals and metals may also qualify if used outside the United States and extracted within the United States. However, there are special rules for depletable products that require items to meet a “50-percent manufactured or processed” test. In addition, certain items such as primary products from oil, gas, coal, or uranium, unprocessed softwood timber, and “export controlled” products are excluded from DISC benefits.
SERVICES GENERAL QUALIFICATION CRITERIA:
Architectural or Engineering Services
Related and Subsidiary Services
If any of your company’s products or services meet these criteria,
or if you have questions, please contact us for a free analysis. Or call us at 1-866-341-4096.