1120-IC DISC Instructions for Form 1120-IC DISC

Instructions for
Form 1120-IC-DISC

Department of the Treasury
Internal Revenue Service

(Rev. December 2012)

Interest Charge Domestic International
Sales Corporation Return
Section references are to the Internal Revenue
Code unless otherwise noted.

Contents
General Instructions . . . . . . . . .
Purpose of Form . . . . . . . . . . .
Who Must File . . . . . . . . . . . .
When To File . . . . . . . . . . . . .
Where To File . . . . . . . . . . . . .
Who Must Sign . . . . . . . . . . . .
Other Forms and Statements That
May Be Required . . . . . . .
Assembling the Return . . . . . . .
Accounting Methods . . . . . . . .
Accounting Periods . . . . . . . . .
Rounding Off To Whole Dollars .
Recordkeeping . . . . . . . . . . . .
Definitions . . . . . . . . . . . . . . .
Penalties . . . . . . . . . . . . . . . .
Specific Instructions . . . . . . . . .
Schedule A . . . . . . . . . . . . . .
Schedule B . . . . . . . . . . . . . .
Schedule C . . . . . . . . . . . . . .
Schedule E . . . . . . . . . . . . . .
Schedule J . . . . . . . . . . . . . .
Schedule K . . . . . . . . . . . . . .
Schedule L . . . . . . . . . . . . . .
Schedule N . . . . . . . . . . . . . .
Schedule O . . . . . . . . . . . . . .
Schedule P . . . . . . . . . . . . . .

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What's New
Under Schedule O, Other Information, we
have added Question 8 to request Form
5472 reporting information regarding
foreign ownership of the IC-DISC.

Future Developments

For the latest information about
developments related to Form 1120–
IC-DISC, and its instructions, such as
legislation enacted after they were
published, go to www.irs.gov/
form1120icdisc.

General Instructions
Purpose of Form

Form 1120-IC-DISC is an information
return filed by interest charge domestic
international sales corporations
(IC-DISCs), former DISCs, and former
IC-DISCs.

Nov 30, 2012

What Is an IC-DISC?

An IC-DISC is a domestic corporation that
has elected to be an IC-DISC and its
election is still in effect. The IC-DISC
election is made by filing Form 4876-A,
Election To Be Treated as an Interest
Charge DISC.
Generally, an IC-DISC is not taxed on
its income. Shareholders of an IC-DISC
are taxed on its income when the income
is actually (or deemed) distributed. In
addition, section 995(f) imposes an
interest charge on shareholders for their
share of DISC-related deferred tax liability.
See Form 8404, Interest Charge on
DISC-Related Deferred Tax Liability, for
details.
To be an IC-DISC, a corporation must
be organized under the laws of a state or
the District of Columbia and meet the
following tests.
At least 95% of its gross receipts during
the tax year are qualified export receipts.
At the end of the tax year, the adjusted
basis of its qualified export assets is at
least 95% of the sum of the adjusted basis
of all of its assets.
It has only one class of stock, and its
outstanding stock has a par or stated
value of at least $2,500 on each day of the
tax year (or, for a new corporation, on the
last day to elect IC-DISC status for the
year and on each later day).
It maintains separate books and
records.
It is not a member of any controlled
group of which a foreign sales corporation
(FSC) is a member.
Its tax year must conform to the tax year
of the principal shareholder who has the
highest percentage of voting power. If two
or more shareholders have the highest
percentage of voting power, the IC-DISC
must elect a tax year that conforms to that
of any one of the principal shareholders.
See section 441(h) and its regulations for
more information.
Its election to be treated as an IC-DISC
is in effect for the tax year.
See Definitions on page 3 and section
992 and related regulations for details.
Distribution to meet qualification requirements.
An IC-DISC that does not meet the
gross receipts test or qualified export
asset test during the tax year will still be
Cat. No. 11476W

considered to have met them if, after the
tax year ends, the IC-DISC makes a pro
rata property distribution to its
shareholders and specifies at the time that
this is a distribution to meet the
qualification requirements.
If the IC-DISC did not meet the gross
receipts test, the distribution equals the
part of its taxable income attributable to
gross receipts that are not qualified export
gross receipts.
If it did not meet the qualified export
asset test, the distribution equals the fair
market value of the assets that are not
qualified export assets on the last day of
the tax year.
If the IC-DISC did not meet either test,
the distribution equals the sum of both
amounts.
Regulations section 1.992-3 explains
how to figure the distribution.
Interest on late distribution. If the
IC-DISC makes a distribution after Form
1120-IC-DISC is due, interest must be
paid to the United States Treasury. The
interest charge is 41 2% of the distribution
times the number of tax years that begin
after the tax year to which the distribution
relates until the date the IC-DISC made
the distribution.
If the IC-DISC must pay this interest,
send the payment to the Internal Revenue
Service Center where you filed Form
1120-IC-DISC within 30 days of making
the distribution. On the payment, write the
IC-DISC's name, address, and employer
identification number; the tax year; and a
statement that the payment represents the
interest charge under Regulations section
1.992-3(c)(4).

Who Must File

The corporation must file Form
1120-IC-DISC if it elected, by filing Form
4876-A, to be treated as an IC-DISC and
its election is in effect for the tax year.
If the corporation is a former DISC or
former IC-DISC, it must file Form
1120-IC-DISC in addition to any other
return required.
A former DISC is a corporation that
was a DISC on or before December 31,
1984, but failed to qualify as a DISC after
December 31, 1984, or did not elect to be
an IC-DISC after 1984; and at the
beginning of the current tax year, it had

undistributed income that was previously
taxed or it had accumulated DISC income.

Any other corporate officer (such as tax
officer) authorized to sign.

A former IC-DISC is a corporation that
was an IC-DISC in an earlier year but did
not qualify as an IC-DISC for the current
tax year; and at the beginning of the
current tax year, it had undistributed
income that was previously taxed or
accumulated IC-DISC income. See
section 992 and related regulations.

If a return is filed on behalf of a
corporation by a receiver, trustee, or
assignee, the fiduciary must sign the
return, instead of the corporate officer.
Returns and forms signed by a receiver or
trustee in bankruptcy on behalf of a
corporation must be accompanied by a
copy of the order or instructions of the
court authorizing signing of the return or
form.

A former DISC or former IC-DISC need
not complete lines 1 through 8 on page 1
and the Schedules for figuring taxable
income, but must complete Schedules J,
L, and M of Form 1120-IC-DISC and
Schedule K (Form 1120-IC-DISC). Write
“Former DISC” or “Former IC-DISC”
across the top of the return.

When To File

File Form 1120-IC-DISC by the 15th day
of the 9th month after its tax year ends. No
extensions are allowed. If the due date
falls on a Saturday, Sunday, or a legal
holiday, the corporation may file on the
next business day.
Private delivery services. Corporations
may use certain private delivery services
designated by the IRS to meet the “timely
mailing as timely filing/paying” rule for tax
returns and payments. These private
delivery services include only the
following.
DHL Express (DHL): DHL Same Day
Service.
Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, and FedEx
International First.
United Parcel Service (UPS): UPS Next
Day Air, UPS Next Day Air Saver, UPS
2nd Day Air, UPS 2nd Day Air A.M., UPS
Worldwide Express Plus, and UPS
Worldwide Express.
The private delivery service can tell you
how to get written proof of the mailing
date.
Private delivery services cannot
deliver items to P.O. boxes. You
CAUTION
must use the U.S. Postal Service
to mail any item to an IRS P.O. box
address.

!

Where To File

File Form 1120-IC-DISC at the following
address: Internal Revenue Service, 201
W. Rivercenter Blvd., Covington, KY
41019.

Who Must Sign

The return must be signed and dated by:
The president, vice president, treasurer,
assistant treasurer, chief accounting
officer or

If an employee of the corporation
completes Form 1120-IC-DISC, the paid
preparer's space should remain blank.
Anyone who prepares Form
1120-IC-DISC but does not charge the
corporation should not complete that
section. Generally, anyone who is paid to
prepare Form 1120-IC-DISC must sign it
and fill in the “Paid Preparer Use Only”
area.
The paid preparer must complete the
required preparer information and:
Sign the return in the space provided for
the preparer's signature.
Give a copy of the return to the
taxpayer.
Note. A paid preparer may sign original or
amended returns by rubber stamp,
mechanical device, or computer software
program.

Other Forms and
Statements That May Be
Required
Shareholders who are foreign persons. The corporation should inform
shareholders who are nonresident alien
individuals or foreign corporations, trusts,
or estates that if they have gains from
disposal of stock in the IC-DISC, former
DISC, or former IC-DISC, or distributions
from accumulated IC-DISC income,
including deemed distributions, they must
treat these amounts as effectively
connected with the conduct of a trade or
business conducted through a permanent
establishment in the United States and
derived from sources within the United
States.
Election to reduce basis under section
362(e)(2)(C). The transferor may make a
joint election under section 362(e)(2)(C) to
limit the transferor's basis in the stock
received instead of the transferee's basis
in the transferred property. The transferor
can make the election by including the
certification as provided in Notice
2005-70, 2005-41 I.R.B. 694 on or with its
tax return filed by the due date (including
extensions) for the tax year in which the
transaction occurred. If the transferor is a
controlled foreign corporation, its
controlling U.S. shareholder(s) can make
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the election. The common parent of a
consolidated group can make the election
for the group.
If the election is made as described
above, no election need be made by the
transferee (or any controlling U.S.
shareholder thereof).
Once made, the election is irrevocable.
See section 362(e)(2)(C) and Notice
2005-70.
Other forms and statements. See the
Instructions for Form 1120 and Pub. 542
for a list of other forms and statements a
corporation may need to file in addition to
the forms and statements discussed
throughout these instructions.

Assembling the Return

To ensure that the corporation's tax return
is correctly processed, attach all
schedules and other forms after page 6,
Form 1120-IC-DISC, and in the following
order.
1. Schedule N (Form 1120).
2. Form 4136.
3. Additional schedules in
alphabetical order.
4. Additional forms in numerical order.
Complete every applicable entry space
on Form 1120-IC-DISC. Do not enter “See
Attached” or “Available Upon Request”
instead of completing the entry spaces. If
more space is needed on the forms or
schedules, attach separate statements
using the same size and format as the
printed forms. If there are supporting
statements and attachments, arrange
them in the same order as the schedules
or forms they support and attach them
last. Show the totals on the printed forms.
Enter the corporation's name and EIN on
each supporting statement or attachment.

Accounting Methods

Figure taxable income using the method of
accounting regularly used in keeping the
IC-DISC's books and records. In all cases,
the method used must clearly show
taxable income. Permissible methods
include cash, accrual, or any other method
authorized by the Internal Revenue Code.
Generally, the following rules apply.
An IC-DISC must use the accrual
method of accounting if its average annual
gross receipts exceed $5 million.
However, see Nonaccrual experience
method for service providers on page 6.
Unless it is a qualifying taxpayer or a
qualifying small business taxpayer, an
IC-DISC must use the accrual method for
sales and purchases of inventory items.
See Cost of Goods Sold on page 5.
A member of a controlled group may
not use an accounting method that would
distort any group member's income,
including its own. For example, an

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

IC-DISC acts as a commission agent for
property sales by a related corporation
that uses the accrual method and pays the
IC-DISC its commission more than 2
months after the sale. In this case, the
IC-DISC should not use the cash method
of accounting because that method
materially distorts its income.
Change in accounting method. To
change its method of accounting used to
report taxable income, for income as a
whole or for the treatment of any material
item, the IC-DISC must file Form 3115,
Application for Change in Accounting
Method.
See Form 3115 and Pub. 538,
Accounting Periods and Methods, for
more information on accounting methods.

Accounting Periods

An IC-DISC must figure its taxable income
on the basis of a tax year. A tax year is the
annual accounting period an IC-DISC
uses to keep its records and report its
income and expenses. Generally,
IC-DISCs may use a calendar year or a
fiscal year.
Note. The tax year of an IC-DISC must be
the same as the tax year of the principal
shareholder which, at the beginning of the
IC-DISC tax year, has the highest
percentage of voting power. If two or more
shareholders have the highest percentage
of voting power, the IC-DISC must have a
tax year that conforms to the tax year of
any such shareholder. See section 441(h).
See Pub. 538 for more information on
accounting periods and tax years.

Rounding Off To Whole
Dollars

The IC-DISC may round off cents to whole
dollars on its return and schedules. If the
IC-DISC does round to whole dollars, it
must round all amounts. To round, drop
amounts under 50 cents and increase
amounts from 50 to 99 cents to the next
dollar (for example, $1.39 becomes $1
and $2.50 becomes $3).
If two or more amounts must be added
to figure the amount to enter on a line,
include cents when adding the amounts
and round off only the total.

Recordkeeping

Keep the IC-DISC's records for as long as
they may be needed for the administration
of any provision of the Internal Revenue
Code. Usually, records that support an
item of income, deduction, or credit on the
return must be kept for 3 years from the
date the return is due or filed, whichever is
later. Keep records that verify the
IC-DISC's basis in property for as long as
they are needed to figure the basis of the
original or replacement property.

The IC-DISC should keep copies of all
filed returns. They help in preparing future
and amended returns and in the
calculation of earnings and profits.

Definitions

The following definitions are based on
sections 993 and 994.
Note. “United States,” as used in the
following instructions, includes Puerto
Rico and U.S. possessions, as well as the
50 states and the District of Columbia.

Section 993

Qualified export receipts are any of the
following.
1. Gross receipts from selling,
exchanging, or otherwise disposing of
export property.
2. Gross receipts from leasing or
renting export property that the lessee
uses outside the United States.
3. Gross receipts from supporting
services related to any qualified sale,
exchange, lease, rental, or other
disposition of export property by the
IC-DISC.
4. Gross receipts from selling,
exchanging, or otherwise disposing of
qualified export assets that are not export
property, but only if there is a recognized
gain.
5. Dividends (or amounts includible in
gross income under section 951) with
respect to stock of a related foreign export
corporation (defined below).
6. Interest on any obligation that is a
qualified export asset.
7. Gross receipts for engineering or
architectural services for construction
projects outside the United States.
8. Gross receipts for the performance
of managerial services in furtherance of
the production of other qualified export
receipts of an IC-DISC.
For more information, see Regulations
section 1.993-1.
Qualified export assets are any of the
following.
1. Export property (see below).
2. Assets used primarily in connection
with the sale, lease, rental, storage,
handling, transportation, packaging,
assembly, or servicing of export property,
or the performance of engineering or
architectural services described in item 7
of Qualified export receipts above or
managerial services in furtherance of the
production of qualified export receipts
described in items 1, 2, 3, and 7 above.
3. Accounts receivable produced by
transactions listed under Qualified export
receipts, items 1–4, 7, or 8 above.
4. Temporary investments, such as
money and bank deposits, in an amount

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

-3-

reasonable to meet the IC-DISC's needs
for working capital.
5. Obligations related to a producer's
loan.
6. Stock or securities of a related
foreign export corporation (defined
below).
7. Certain obligations that are issued
or insured by the U.S. Export-Import Bank
or the Foreign Credit Insurance
Association and that the IC-DISC acquires
from such Bank or Association or from the
person who sold or bought the goods or
services from which the obligations arose.
8. Certain obligations held by the
IC-DISC that were issued by a domestic
corporation organized to finance export
property sales under an agreement with
the Export-Import Bank under which the
domestic corporation makes export loans
that the Export-Import Bank guarantees.
9. Amounts (other than reasonable
working capital) on deposit in the United
States used to acquire qualified export
assets within the time provided by
Regulations section 1.993-2(j).
See Regulations section 1.993-2 for
more information.
Export property must be:
1. Made, grown, or extracted in the
United States by a person other than an
IC-DISC;
2. Neither excluded under section
993(c)(2) nor declared in short supply
under section 993(c)(3);
3. Held mainly for sale, lease, or rent
in the ordinary course of a trade or
business, by or to an IC-DISC for direct
use, consumption, or disposition outside
the United States;
4. Property not more than 50% of the
fair market value of which is attributable to
articles imported into the United States;
and
5. Neither sold nor leased by or to
another IC-DISC that, immediately before
or after the transaction, either belongs to
the same controlled group (defined in
section 993(a)(3)) as your IC-DISC or is
related to your IC-DISC in a way that
would result in losses being denied under
section 267.
See Regulations section 1.993-3 for
details.
A producer's loan must meet all the
following terms.
1. Satisfy the requirements of sections
993(d)(2) and (3).
2. Not raise the unpaid balance due
the IC-DISC on all of its producer's loans
above the level of accumulated IC-DISC
income it had at the start of the month in
which it made the loan.
3. Be evidenced by a note, or other
written evidence of indebtedness, with a

stated maturity date no more than 5 years
after the date of the loan.
4. Be made to a person engaged in a
U.S. trade or business of making, growing,
or extracting export property.
5. Be designated as a producer's loan
when made.
For more information, see Schedule Q
(Form 1120-IC-DISC), Borrower's
Certificate of Compliance With the Rules
for Producer's Loans, and Regulations
section 1.993-4.
A related foreign export corporation
includes the following.
1. A foreign international sales
corporation is a related foreign export
corporation if:
The IC-DISC directly owns more than
50% of the total voting power of the
foreign corporation's stock;
For the tax year that ends with or within
the IC-DISC's tax year, at least 95% of the
foreign corporation's gross receipts
consists of the qualified export receipts
described in items 1–4 of Qualified export
receipts above and interest on the
qualified export assets listed in items 3
and 4 of Qualified export assets on
page 3; and
The adjusted basis of the qualified
export assets in items 1–4 of Qualified
export assets that the foreign corporation
held at the end of the tax year is at least
95% of the adjusted basis of all assets it
held then.
2. A real property holding
company is a related foreign export
corporation if:
The IC-DISC directly owns more than
50% of the total voting power of the
foreign corporation's stock and
Its exclusive function is to hold title to
real property located outside the United
States for the exclusive use (under lease
or otherwise) of the IC-DISC and
applicable foreign law forbids the IC-DISC
to hold title to the property.
3. An associated foreign
corporation is a related foreign export
corporation if:
The IC-DISC or a controlled group of
corporations to which the IC-DISC
belongs owns less than 10% of the total
voting power of the foreign corporation's
stock (section 1563 defines a controlled
group in this sense, and sections 1563(d)
and (e) define ownership) and
The IC-DISC's ownership of the foreign
corporation's stock or securities
reasonably furthers transactions that lead
to qualified export receipts for the
IC-DISC.
See Regulations section 1.993-5 for
more information about related foreign
export corporations.
Gross receipts are the IC-DISC's total
receipts from selling, leasing, or renting

property that the corporation holds for
sale, lease, or rent in the ordinary course
of its trade or business and gross income
from all other sources. For commissions
on selling, leasing, or renting property,
include gross receipts from selling,
leasing, or renting the property on which
the commissions arose. See Regulations
section 1.993-6 for more information.

Section 994, Intercompany
Pricing Rules

If a related person described in section
482 sells export property to the IC-DISC,
use the intercompany pricing rules to
figure taxable income for the IC-DISC and
the seller. These rules generally do not
permit the related person to price at a loss.
Under intercompany pricing, the
IC-DISC's taxable income from the sale
(regardless of the price actually charged)
may not exceed the greatest of:
1. 4% of qualified export receipts on
the IC-DISC's sale of the property plus
10% of the IC-DISC's export promotion
expenses attributable to the receipts,
2. 50% of the IC-DISC's and the
seller's combined taxable income from
qualified export receipts on the property,
derived from the IC-DISC's sale of the
property plus 10% of the IC-DISC's export
promotion expenses attributable to the
receipts, or
3. Taxable income based on the sale
price actually charged, provided that
under section 482 the price actually
charged clearly reflects the taxable
income of the IC-DISC and the related
person.
Schedule P (Form 1120-IC-DISC),
Intercompany Transfer Price or
Commission, explains the intercompany
pricing rules in more detail.

Section 994(c), Export
Promotion Expenses

These are expenses incurred to help
distribute or sell export property for use or
distribution outside the United States.
These expenses do not include income
tax, but do include 50% of the cost of
shipping the export property on
U.S.-owned and U.S.-operated aircraft or
ships in those cases where U.S. law or
regulations do not require that the export
property be shipped on such aircraft or
ships.

Deficits in Earnings and Profits
A deficit in earnings and profits is
chargeable in the following order:
1. First, to any earnings and profits
other than accumulated IC-DISC income
or previously taxed income.
2. Second, to any accumulated
IC-DISC income.
3. Third, to previously taxed income.
-4-

Do not apply any deficit in earnings and
profits against accumulated IC-DISC
income that, as a result of the
corporation's revoking its election to be
treated as an IC-DISC (or other
disqualification), is deemed distributed to
the shareholders. See section 995(b)(2)
(A).

Penalties

The IC-DISC may have to pay the
following penalties unless it can show that
it had reasonable cause for not providing
information or not filing a return.
$100 for each instance of not providing
required information, up to $25,000 during
the calendar year.
$1,000 for not filing a return.
See section 6686 for other details.
If you receive a notice about penalty
and interest after you file Form
1120-IC-DISC, send us an explanation
and we will determine if you meet
reasonable-cause criteria. Do not attach
an explanation when you file Form
1120-IC-DISC.
Trust fund recovery penalty. This
penalty may apply if certain excise,
income, social security, and Medicare
taxes that must be collected or withheld
are not collected or withheld, or these
taxes are not paid. These taxes are
generally reported on:
Form 720, Quarterly Federal Excise Tax
Return;
Form 941, Employer's QUARTERLY
Federal Tax Return; or
Form 945, Annual Return of Withheld
Federal Income Tax.
The trust fund recovery penalty may be
imposed on all persons who are
determined by the IRS to have been
responsible for collecting, accounting for,
and paying over these taxes, and who
acted willfully in not doing so. The penalty
is equal to the unpaid trust fund tax. See
the instructions for Form 720 or Pub. 15
(Circular E), Employer's Tax Guide, for
details, including the definition of
responsible persons.
Other penalties. Other penalties may be
imposed for negligence, substantial
understatement of tax, reportable
transaction understatements, and fraud.
See sections 6662, 6662A, and 6663.

Specific Instructions
Period Covered

Enter the tax year in the space provided at
the top of the form. For a calendar year,
enter the last two digits of the calendar
year in the first entry space. For a fiscal or
short tax year return, fill in the tax year
space at the top of the form.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

Address

Include the suite, room, or other unit
number after the street address. If the post
office does not deliver mail to the street
address and the corporation has a P.O.
box, show the box number instead.

Item C—Employer Identification
Number (EIN)
Enter the corporation's EIN. If the
corporation does not have an EIN, it must
apply for one. An EIN may be applied for:
Online—Click on the EIN link at
www.irs.gov/businesses/small. The EIN is
issued immediately once the application
information is validated.
By telephone at 1-800-829-4933.
By mailing or faxing Form SS-4,
Application for Employer Identification
Number.
If the corporation has not received its
EIN by the time the return is due, enter
“Applied for” and the date you applied in
the space for the EIN. For more details,
see the instructions for Form SS-4.
Note. Only corporations located in the
United States or U.S. possessions can
use the online application. Foreign
corporations must use one of the other
methods to apply.

Item E—Total Assets
Enter the IC-DISC's total assets (as
determined by the accounting method
regularly used in keeping the IC-DISC's
books and records) at the end of the tax
year. If there are no assets at the end of
the tax year, enter -0-.

Item F—Initial Return, Final Return,
Name Change, Address Change,
or Amended Return
If this is the IC-DISC's initial or final
return, check the applicable box in item F
at the top of the form.
If the IC-DISC has changed its address
since it last filed a return, check the box for
“Address change.”
Note. If a change in address occurs after
the return is filed, use Form 8822-B,
Change of Address — Business, to notify
the IRS of the new address.
If the IC-DISC changed its name since it
last filed a return, check the box for “Name
change.” Generally, an IC-DISC also must
have amended its articles of incorporation
and filed the amendment with the state in
which it was incorporated.
To correct an error on a Form
1120-IC-DISC already filed, file an
amended Form 1120-IC-DISC and check
the “Amended return” box. If the amended
return changes the income or distributions
of income to shareholders, an amended

Schedule K (Form 1120-IC-DISC) must be
filed with the amended Form
1120-IC-DISC and given to each
shareholder. Write “AMENDED” across
the top of the corrected Schedule K you
give to each shareholder.

Question G(1)
For rules of stock attribution, see section
267(c). If the owner of the voting stock of
the IC-DISC was an alien individual or a
foreign corporation, partnership, trust, or
estate, check the “Yes” box in the “Foreign
owner” column and enter the name of the
owner's country, in parentheses, in the
address column. “Owner's country” for
individuals is their country of residence;
for other foreign entities, it is the country in
which organized or otherwise created, or
in which administered.

Taxable Income

An IC-DISC must figure its taxable income
although it does not pay most taxes. An
IC-DISC is exempt from the corporate
income tax, alternative minimum tax, and
accumulated earnings tax.
An IC-DISC may not claim the general
business credit or the credit for fuel
produced from a nonconventional source.
In addition, these credits may not be
passed through to shareholders of the
corporation.

Line 6a. Net Operating Loss
Deduction
The net operating loss deduction is the
amount of the net operating loss carryover
and carryback that may be deducted in
the tax year. See section 172 for details.

Line 7. Taxable Income
If the IC-DISC uses either the gross
receipts method or combined taxable
income method to compute the IC-DISC's
taxable income attributable to any
transactions involving products or product
lines, attach Schedule P (Form
1120-IC-DISC). Show in detail the
IC-DISC's taxable income attributable to
each such transaction or group of
transactions.

Line 8. Refundable Credit for
Federal Tax Paid on Fuels
Enter the credit from Form 4136.

Schedule A
Cost of Goods Sold

Generally, inventories are required at the
beginning and end of each tax year if the
purchase or sale of merchandise is an
income-producing factor. See Regulations
section 1.471-1.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

-5-

However, if the IC-DISC is a qualifying
taxpayer or a qualifying small business
taxpayer, it can adopt or change its
accounting method to account for
inventoriable items in the same manner as
materials and supplies that are not
incidental.
A qualifying taxpayer is a taxpayer
that, for each prior tax year ending after
December 16, 1998, has average annual
gross receipts of $1 million or less for the
3 prior tax years.
A qualifying small business
taxpayer is a taxpayer (a) that, for each
prior tax year ending on or after December
31, 2000, has average annual gross
receipts of $10 million or less for the 3
prior tax years and (b) whose principal
business activity is not an ineligible
activity.
Under this accounting method,
inventory costs for merchandise
purchased for resale are deductible in the
year the merchandise is sold (but not
before the year the IC-DISC paid for the
merchandise, if it is also using the cash
method). For additional guidance on this
method of accounting for inventoriable
items, see Pub. 538.
Enter amounts paid for merchandise
during the tax year on line 2. The amount
the IC-DISC may deduct for the tax year is
figured on line 8.
All filers not using the cash method of
accounting should see Section 263A
uniform capitalization rules on page 8
before completing Schedule A.
If the IC-DISC uses intercompany
pricing rules (for purchases from a related
supplier), use the transfer price figured in
Part II of Schedule P (Form
1120-IC-DISC).
If the IC-DISC acts as another person's
commission agent on a sale, do not enter
any amount in Schedule A for the sale.
See Schedule P (Form 1120-IC-DISC).

Line 1. Inventory at Beginning
of Year
If the IC-DISC is changing its method of
accounting for the current tax year, it must
refigure last year's closing inventory using
the new method of accounting and enter
the result on line 1. If there is a difference
between last year's closing inventory and
the refigured amount, attach an
explanation and take it into account when
figuring the IC-DISC's section 481(a)
adjustment (explained on page 7).

Line 4. Additional Section 263A
Costs
An entry is required on this line only for
IC-DISCs that have elected a simplified
method of accounting.

For IC-DISCs that have elected the
simplified production method, additional
section 263A costs are generally those
costs, other than interest, that were not
capitalized under the IC-DISC's method of
accounting immediately prior to the
effective date of section 263A but are now
required to be capitalized under section
263A. For details, see Regulations section
1.263A-2(b).
For IC-DISCs that have elected the
simplified resale method, additional
section 263A costs are generally those
costs incurred with respect to the following
categories:
Off-site storage or warehousing.
Purchasing.
Handling, such as processing,
assembling, repackaging, and
transporting.
General and administrative costs
(mixed service costs).
For details, see Regulations section
1.263A-3(d).
Enter on line 4 the balance of section
263A costs paid or incurred during the tax
year not includible on lines 2, 3, and 5.

Line 5. Other Costs
Enter on line 5 any costs paid or incurred
during the tax year not entered on lines 2
through 4.

Line 7. Inventory at End of Year
See Regulations sections 1.263A-1
through 1.263A-3 for details on figuring
the amount of additional section 263A
costs to be included in ending inventory. If
the IC-DISC accounts for inventoriable
items in the same manner as materials
and supplies that are not incidental, enter
on line 7 the portion of its merchandise
purchased for resale that is included on
line 6 and was not sold during the year.

Lines 9a through 9f. Inventory
Valuation Methods
Inventories may be valued at:
Cost;
Cost or market value (whichever is
lower); or
Any other method approved by the IRS
that conforms to the requirements of the
applicable regulations cited below.
However, if the IC-DISC is using the
cash method of accounting, it is required
to use cost.
IC-DISCs that account for inventoriable
items in the same manner as materials
and supplies that are not incidental may
currently deduct expenditures for direct

labor and all indirect costs that would
otherwise be included in inventory costs.

For more information on inventory
valuation methods, see Pub. 538.

The rolling average method of valuing
inventories generally does not clearly
reflect income for federal income tax
purposes. However, if an IC-DISC uses
the average cost method for financial
accounting purposes, there are two safe
harbors under which this method will be
deemed to clearly reflect income for
federal income tax purposes. See Rev.
Proc. 2008-43, 2008-30 I.R.B. 186, as
modified by Rev. Proc. 2008-52, 2008-36
I.R.B. 587, and as modified by Rev. Proc.
2011-14, 2011-4 I.R.B. 330, or a
successor.

Schedule B

IC-DISCs that use erroneous valuation
methods must change to a method
permitted for Federal income tax
purposes. Use Form 3115 to make this
change.
On line 9a, check the method(s) used
for valuing inventories. Under lower of cost
or market, the term “market” (for normal
goods) means the current bid price
prevailing on the inventory valuation date
for the particular merchandise in the
volume usually purchased by the
taxpayer. If section 263A applies to the
taxpayer, the basic elements of cost must
reflect the current bid price of all direct
costs and all indirect costs properly
allocable to goods on hand at the
inventory date.
Inventory may be valued below cost
when the merchandise is unsalable at
normal prices or unusable in the normal
way because the goods are subnormal
due to damage, imperfections, shopwear,
etc., within the meaning of Regulations
section 1.471-2(c). The goods may be
valued at the current bona fide selling
price, minus direct cost of disposition (but
not less than scrap value) if such a price
can be established.
If this is the first year the Last-in,
First-out (LIFO) inventory method was
either adopted or extended to inventory
goods not previously valued under the
LIFO method provided in section 472,
attach Form 970, Application To Use LIFO
Inventory Method, or a statement with the
information required by Form 970. Also
check the LIFO box on line 9c. On line 9d,
enter the amount or the percent of total
closing inventories covered under section
472. Estimates are acceptable.
If the IC-DISC changed or extended its
inventory method to LIFO and had to write
up the opening inventory to cost in the
year of election, report the effect of the
write-up as other income (on page 2,
Schedule B, line 2j or 3f), proportionately
over a 3-year period that begins with the
year of the LIFO election (section 472(d)).
-6-

Gross Income

If an income item falls into two or more
categories, report each part on the
applicable line. For example, if interest
income consists of qualified interest from
a foreign international sales corporation
and nonqualifying interest from a domestic
obligation, enter the qualified interest on
an attached statement for line 2g and the
nonqualifying interest on an attached
statement for line 3f.
For gain from selling qualified export
assets, attach a separate statement in
addition to the forms required for lines 2h
and 2i.
Nonaccrual experience method for
service providers. Accrual method
corporations are not required to accrue
certain amounts to be received from the
performance of certain services that, on
the basis of their experience, will not be
collected, if the corporation's average
annual gross receipts for the 3 prior tax
years does not exceed $5 million.
This provision does not apply to any
amount if interest is required to be paid on
the amount or if there is any penalty for
failure to timely pay the amount. For more
information, see section 448(d)(5) and
Regulations section 1.448-2. Also, see
Rev. Proc. 2011-46, 2011-42, I.R.B. 518
for information on a book safe harbor
method of accounting for corporations that
use the nonaccrual experience method of
accounting, and procedures to obtain
automatic consent to change to this
method or make certain changes within
this method.
Corporations that qualify to use the
nonaccrual experience method should
attach a statement showing total gross
receipts, the amount not accrued as a
result of the application of section 448(d)
(5), and the net amount accrued. Enter the
amount on the applicable line of
Schedule B.

Commissions: Special Rule
Note. “United States,” as used in the
following instructions, includes Puerto
Rico and U.S. possessions, as well as the
50 states and the District of Columbia.
If the IC-DISC received commissions on
selling or renting property or furnishing
services, list in column (b) the gross
receipts from the sales, rentals, or
services on which the commissions arose,
and in column (c), list the commissions
earned. In column (d) report receipts from
noncommissioned sales or rentals of
property or furnishing of services, as well
as all other receipts.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

For purposes of completing line 1a and
line 1b, related purchasers are members
of the same controlled group (as defined
in section 993(a)(3)) as the IC-DISC. All
other purchasers are unrelated.
A qualified export sale or lease must
meet a use test and a destination test in
order to qualify.
The use test applies at the time of the
sale or lease. If the property is used
predominantly outside the United States
and the sale or lease is not for ultimate
use in the United States, it is a qualified
export sale or lease. Otherwise, if a
reasonable person would believe that the
property will be used in the United States,
the sale or lease is not a qualified export
sale or lease. For example, if property is
sold to a foreign wholesaler and it is
known in trade circles that the wholesaler,
to a substantial extent, supplies the U.S.
retail market, the sale would not be a
qualified export sale, and the receipts
would not be qualified export receipts.
Regardless of where title or risk of loss
shifts from the seller or lessor, the property
must be delivered under one of the
following conditions to meet the
destination test:
1. Within the United States to a carrier
or freight forwarder for ultimate delivery
outside the United States to a buyer or
lessee.
2. Within the United States to a buyer
or lessee who, within 1 year of the sale or
lease, delivers it outside the United States
or delivers it to another person for ultimate
delivery outside the United States.
3. Within or outside the United States
to an IC-DISC that is not a member of the
same controlled group (as defined in
section 993(a)(3)) as the seller or lessor.
4. Outside the United States by
means of the seller's delivery vehicle
(ship, plane, etc.).
5. Outside the United States to a
buyer or lessee at a storage or assembly
site if the property was previously shipped
from the United States by the seller or
lessor.
6. Outside the United States to a
purchaser or lessee if the property was
previously shipped by the seller or lessor
from the United States and if the property
is located outside the United States
pursuant to a prior lease by the seller or
lessor, and either (a) the prior lease
terminated at the expiration of its term (or
by the action of the prior lessee acting
alone), (b) the sale occurred or the term of
the subsequent lease began after the time
at which the term of the prior lease would
have expired, or (c) the lessee under the
subsequent lease is not a related person
(a member of the same controlled group
as defined in section 993(a)(3) or a

relationship that would result in a
disallowance of losses under section 267
or section 707(b)) immediately before or
after the lease with respect to the lessor,
and the prior lease was terminated by the
action of the lessor (acting alone or
together with the lessee).

Line-by-Line Instructions
Line 1a. Enter the IC-DISC's qualified
export receipts from export property sold
to foreign, unrelated buyers for delivery
outside the United States. Do not include
amounts entered on line 1b.
Line 1b. Enter the IC-DISC's qualified
export receipts from export property sold
for delivery outside the United States to a
related foreign entity for resale to a
foreign, unrelated buyer, or an unrelated
buyer when a related foreign entity acts as
commission agent.
Line 2a. Enter the gross amount received
from leasing or subleasing export property
to unrelated persons for use outside the
United States.
Receipts from leasing export property
may qualify in some years and not in
others, depending on where the lessee
uses the property. Enter only receipts that
qualify during the tax year. (Use
Schedule E to deduct expenses such as
repairs, interest, taxes, and depreciation.)
Line 2b. A service connected to a sale or
lease is related to it if the service is usually
furnished with that type of sale or lease in
the trade or business where it took place.
A service is subsidiary if it is less important
than the sale or lease.
Line 2c. Include receipts from
engineering or architectural services on
foreign construction projects abroad or
proposed for location abroad. These
services include feasibility studies, design
and engineering, and general supervision
of construction, but do not include
services connected with mineral
exploration.
Line 2d. Include receipts for export
management services provided to
unrelated IC-DISCs.
Line 2f. Include interest received on any
loan that qualifies as a producer's loan.
Line 2g. Enter interest on any qualified
export asset other than interest on
producer's loans. For example, include
interest on accounts receivable from sales
in which the IC-DISC acted as a principal
or agent and interest on certain obligations
issued, guaranteed, or insured by the
Export-Import Bank or the Foreign Credit
Insurance Association.
Line 2h. On Schedule D (Form 1120),
Capital Gains and Losses, report in detail
every sale or exchange of a capital asset,
even if there is no gain or loss.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

-7-

In addition to Schedule D (Form 1120),
attach a separate statement computing
gain from the sale of qualified export
assets.
Line 2i. Enter the net gain or loss from
line 18, Part II, Form 4797, Sales of
Business Property.
In addition to Form 4797, attach a
separate statement computing gain from
the sale of qualified export assets.
Line 2j. Enter any other qualified export
receipts for the tax year not reported on
lines 2a through 2i.
Section 481(a) adjustment. The
IC-DISC may have to make an adjustment
under section 481(a) to prevent amounts
of income or expense from being
duplicated or omitted. This section 481(a)
adjustment period is generally 1 year for a
net negative adjustment and 4 years for a
net positive adjustment. However, an
IC-DISC may elect to use a 1-year
adjustment period if the net section 481(a)
adjustment for the change is less than
$25,000. The IC-DISC must complete the
appropriate lines of Form 3115 to make
the election.
Include any net positive section 481(a)
adjustment on page 2, Schedule B, line 2j
or 3f (depending on whether the inventory,
when sold, will generate qualified export
receipts). If the net section 481(a)
adjustment is negative, report it on page 3,
Schedule E, line 2g.
Line 3b. Enter receipts from selling
products subsidized under a U.S. program
if they have been designated as excluded
receipts.
Line 3c. Enter receipts from selling or
leasing property or services for use by any
part of the U.S. Government if law or
regulations require U.S. products or
services to be used.
Line 3d. Enter receipts from any IC-DISC
that belongs to the same controlled group
(as defined in section 993(a)(3)).
Line 3f. Include in an attached statement
any nonqualifying gross receipts not
reported on lines 3a through 3e. Do not
offset an income item against a similar
expense item.
The IC-DISC may have to report a
section 481(a) adjustment on line 3f. See
Section 481(a) adjustment above for
additional information.

Schedule C
Dividends and
Dividends-Received Deduction

For purposes of the 20% ownership test
on lines 1 through 7, the percentage of
stock owned by the corporation is based
on voting power and value of the stock.

Preferred stock described in section
1504(a)(4) is not taken into account.

Line 1, Column (a)
Enter dividends (except those received on
debt-financed stock acquired after July 18,
1984—see section 246A) that:
Are received from
less-than-20%-owned domestic
corporations subject to income tax and
Qualify for the 70% deduction under
section 243(a)(1).
Also include on line 1:
Taxable distributions from an IC-DISC
or former DISC that are designated as
being eligible for the 70% deduction and
certain dividends of Federal Home Loan
Banks. See section 246(a)(2).
Dividends received (except those
received on debt-financed stock acquired
after July 18, 1984) from a regulated
investment company (RIC). The amount of
dividends eligible for the
dividends-received deduction under
section 243 is limited by section 854(b).
The corporation should receive a notice
from the RIC specifying the amount of
dividends that qualify for the deduction.
Report so-called dividends or earnings
received from mutual savings banks, etc.,
as interest. Do not treat them as
dividends.

Line 2, Column (a)
Enter on line 2:
Dividends (except those received on
debt-financed stock acquired after July 18,
1984) that are received from
20%-or-more-owned domestic
corporations subject to income tax and
that are eligible for the 80% deduction
under section 243(c) and
Taxable distributions from an IC-DISC
or former DISC that are considered
eligible for the 80% deduction.

Line 3, Column (a)
Enter dividends that are:
Received on debt-financed stock
acquired after July 18, 1984, from
domestic and foreign corporations subject
to income tax and that would otherwise be
subject to the dividends-received
deduction under section 243(a)(1), 243(c),
or 245(a). Generally, debt-financed stock
is stock that the corporation acquired by
incurring a debt (e.g., it borrowed money
to buy the stock).
Received from a RIC on debt-financed
stock. The amount of dividends eligible for
the dividends-received deduction is
limited by section 854(b). The corporation
should receive a notice from the RIC
specifying the amount of dividends that
qualify for the deduction.

Line 3, Columns (b) and (c)

Line 9, Column (c)

Dividends received on debt-financed
stock acquired after July 18, 1984, are not
entitled to the full 70% or 80%
dividends-received deduction. The 70% or
80% deduction is reduced by a
percentage that is related to the amount of
debt incurred to acquire the stock. See
section 246A. Also see section 245(a)
before making this computation for an
additional limitation that applies to
dividends received from foreign
corporations. Attach a statement to Form
1120-IC-DISC showing how the amount
on line 3, column (c), was figured.

Generally, line 9, column (c), may not
exceed the amount from the worksheet
below. However, in a year in which an
NOL occurs, this limitation does not apply
even if the loss is created by the
dividends-received deduction. See
sections 172(d) and 246(b).

Line 4, Column (a)
Enter dividends received on the preferred
stock of a less-than-20%-owned public
utility that is subject to income tax and is
allowed the deduction provided in section
247 for dividends paid.

Line 5, Column (a)
Enter dividends received on preferred
stock of a 20%-or-more-owned public
utility that is subject to income tax and is
allowed the deduction under section 247
for dividends paid.

Line 6, Column (a)
Enter the U.S.-source portion of dividends
that:
Are received from
less-than-20%-owned foreign
corporations and
Qualify for the 70% deduction under
section 245(a). To qualify for the 70%
deduction, the corporation must own at
least 10% of the stock of the foreign
corporation by vote and value.

Line 7, Column (a)
Enter the U.S.-source portion of dividends
that are received from
20%-or-more-owned foreign corporations
and that qualify for the 80% deduction
under section 245(a).

Line 8, Column (a)
Enter dividends received from wholly
owned foreign subsidiaries that are
eligible for the 100% deduction under
section 245(b).
In general, the deduction under section
245(b) applies to dividends paid out of the
earnings and profits of a foreign
corporation for a tax year during which:
All of its outstanding stock is owned
(directly or indirectly) by the domestic
corporation receiving the dividends and
All of its gross income from all sources
is effectively connected with the conduct
of a trade or business within the United
States.
-8-

Line 9, Column (c) Worksheet
1. Refigure line 5, page 1, Form
1120-IC-DISC, without any
adjustment under section
1059 and without any capital
loss carryback to the tax year
under section 1212(a)
(1) . . . . . . . . . . . . . . .
2. Multiply line 1 by 80%
(.80) . . . . . . . . . . . . . .
3. Add lines 2, 5, 7, and 8,
column (c), and the part of the
deduction on line 3, column
(c), that is attributable to
dividends received from
20%-or-more-owned
corporations . . . . . . . . .
4. Enter the smaller of line 2 or
line 3. If line 3 is larger than
line 2, do not complete the
rest of this worksheet.
Instead, enter the amount
from line 4 in the margin next
to line 9 of Schedule C and on
line 6b, page 1, Form
1120-IC-DISC . . . . . . . .
5. Enter the total amount of
dividends received from
20%-or-more-owned
corporations that are included
on lines 2, 3, 5, 7, and 8 of
column (a) . . . . . . . . . .
6. Subtract line 5 from
line 1
. . . . . . . . . . . . .
7. Multiply line 6 by 70%
(.70) . . . . . . . . . . . . . .
8. Subtract line 3 above from
column (c) of line 9 . . . . .
9. Enter the smaller of line 7 or
line 8
. . . . . . . . . . . . .
10. Dividends-received
deduction after limitation.
Add lines 4 and 9. (If this is
less than line 9 of
Schedule C, enter the smaller
amount on line 6b, page 1,
Form 1120-IC-DISC, and in
the margin next to line 9 of
Schedule C.)
. . . . . . . .

Line 13, Column (a)
Include the following:
Dividends (other than capital gain
distributions reported on Schedule D
(Form 1120) and exempt-interest
dividends) that are received from RICs
and that are not subject to the 70%
deduction.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

Dividends from tax-exempt
organizations.
Dividends (other than capital gain
distributions) received from a real estate
investment trust that, for the tax year of the
trust in which the dividends are paid,
qualifies under sections 856 through 860.
Dividends not eligible for a
dividends-received deduction, which
include the following:
1. Dividends received on any share of
stock held for less than 46 days during the
91-day period beginning 45 days before
the ex-dividend date. When counting the
number of days the corporation held the
stock, you may not count certain days
during which the corporation's risk of loss
was diminished. See section 246(c)(4)
and Regulations section 1.246-5 for more
details.
2. Dividends attributable to periods
totaling more than 366 days that the
IC-DISC received on any share of
preferred stock held for less than 91 days
during the 181-day period that began 90
days before the ex-dividend date. When
counting the number of days the IC-DISC
held the stock, you may not count certain
days during which the IC-DISC's risk of
loss was diminished. See section 246(c)
(4) and Regulations section 1.246-5 for
more details. Preferred dividends
attributable to periods totaling less than
367 days are subject to the 46-day holding
period rule above.
3. Dividends on any share of stock to
the extent the IC-DISC is under an
obligation (including a short sale) to make
related payments with respect to positions
in substantially similar or related property.
Any other taxable dividend income not
properly reported elsewhere on
Schedule C.

Line 15, Column (a)
Qualified dividends are dividends that
qualify as qualified export receipts. They
include all dividends (or amounts)
includible in gross income (under section
951) that are attributable to stock of
related foreign export corporations. See
Qualified export receipts on page 3 and A
related foreign export corporation on
page 3 for more details.

Schedule E
Deductions
Limitations on Deductions
Section 263A uniform capitalization
rules. The uniform capitalization rules of
section 263A generally require
corporations to capitalize, or include in
inventory, certain costs incurred in
connection with:
Personal property (tangible and certain
intangible property) acquired for resale.

The production of real property and
tangible personal property by a
corporation for use in its trade or business
or in an activity engaged in for profit.
Tangible personal property produced
by a corporation includes a film, sound
recording, videotape, book, or similar
property.
IC-DISCs subject to the section 263A
uniform capitalization rules are required to
capitalize:
1. Direct costs and
2. An allocable part of most indirect
costs (including taxes) that (a) benefit the
assets produced or acquired for resale or
(b) are incurred by reason of the
performance of production or resale
activities.

deductions for unpaid interest and
expenses.
Corporations use Form 8926,
Disqualified Corporate Interest Expense
Under Section 163(j) and Related
Information, to figure the amount of any
corporate interest disallowed by section
163(j).

For inventory, some of the indirect
expenses that must be capitalized are:
Administration expenses,
Taxes,
Depreciation,
Insurance,
Compensation paid to officers
attributable to services,
Rework labor, and
Contributions to pension, stock bonus,
and certain profit-sharing, annuity, or
deferred compensation plans.
Regulations section 1.263A-1(e)(3)
specifies other indirect costs that relate to
production or resale activities that must be
capitalized and those that may be
currently deductible.
Interest expense paid or incurred
during the production period of designated
property must be capitalized and is
governed by special rules. For more
details, see Regulations sections
1.263A-8 through 1.263A-15.
The costs required to be capitalized
under section 263A are not deductible
until the property (to which the costs
relate) is sold, used, or otherwise
disposed of by the corporation.

Business start-up and organizational
costs. Business start-up and
organizational costs must be capitalized
unless an election is made to deduct or
amortize them. The following rules apply
separately to each category of costs.
The IC-DISC may elect to deduct up to
$5,000 of such costs for the year the
IC-DISC begins business operations.
The $5,000 deduction is reduced (but
not below zero) by the amount the total
costs exceed $50,000. If the total costs
are $55,000 or more, the deduction is
reduced to zero.
If the election is made, any costs that
are not deductible must be amortized
ratably over a 180-month period beginning
with the month the IC-DISC begins
business operations.
Attach any statement required by
Regulations section 1.195-1(b) or
1.248-1(c). Report the deductible amount
of these costs and any amortization on
line 2g of Schedule E. For amortization
that begins during the current tax year,
complete and attach Form 4562.
For more information, see Pub. 535,
Business Expenses, and the Instructions
for Form 4562. For more details on the
election for business start-up costs, see
section 195. For more details on the
election for organizational costs, see
section 248.

Exceptions. Section 263A does not
apply to:
Personal property acquired for resale if
the IC-DISC's average annual gross
receipts for the 3 prior tax years were $10
million or less.
Inventoriable items accounted for in the
same manner as materials and supplies
that are not incidental. See Cost of Goods
Sold on page 5 for details.
For more details on the uniform
capitalization rules, see Regulations
sections 1.263A-1 through 1.263A-3.
Transactions between related taxpayers. Generally, an accrual basis taxpayer
may only deduct business expenses and
interest owed to a related party in the year
the payment is included in the income of
the related party. See sections 163(e)(3),
163(j), and 267 for limitations on

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

-9-

Golden parachute payments. A portion
of the payments made by a corporation to
key personnel that exceeds their usual
compensation may not be deductible. This
occurs when the corporation has an
agreement (golden parachute) with these
key employees to pay them these excess
amounts if control of the corporation
changes. See section 280G and
Regulations section 1.280G-1. Also, see
the instructions for line 1i.

Limitations on deductions related to
property leased to tax-exempt entities.
If an IC-DISC leases property to a
governmental or other tax-exempt entity, it
may not claim deductions related to the
property to the extent that they exceed the
IC-DISC's income from the lease
payments (tax exempt use loss). Amounts
disallowed may be carried over to the next
tax year and treated as a deduction with
respect to the property for that tax year.
See section 470 for more details and
exceptions.

Contributions. See the Instructions for
Form 1120 and Pub. 542 for limitations
that apply to contributions.

Line 1. Export Promotion
Expenses
Enter export promotion expenses on lines
1a through 1m. Export promotion
expenses are an IC-DISC's ordinary and
necessary expenses paid or incurred to
obtain qualified export receipts. Do not
include income taxes. Enter on lines 2a
through 2g any part of an expense not
incurred to obtain qualified export
receipts.

Line 1d. Salaries and Wages
Enter the total salaries and wages paid for
the tax year. Do not include salaries and
wages deductible elsewhere on the return,
such as amounts included in officers'
compensation, cost of goods sold,
elective contributions to a section 401(k)
cash or deferred arrangement, or amounts
contributed under a salary reduction SEP
agreement or a SIMPLE IRA plan.
If the corporation provided
taxable fringe benefits to its
CAUTION
employees, such as personal use
of a car, do not deduct as wages the
amount allocated for depreciation and
other expenses claimed on lines 1c and
1m.

!

Line 1h. Freight
Enter 50% of the freight expenses (except
insurance) for shipping export property
aboard U.S. flagships and U.S.-owned
and U.S.-operated aircraft in those cases
where you are not required to use U.S.
ships or aircraft by law or regulations.

Line 1i. Compensation of Officers
Enter deductible officers' compensation
on line 1i. Attach a statement showing the
name, social security number, and amount
of compensation paid to all officers. Do
not include compensation deductible
elsewhere on the return, such as amounts
included in cost of goods sold, elective
contributions to a section 401(k) cash or
deferred arrangement, or amounts
contributed under a salary reduction SEP
agreement or a SIMPLE IRA plan. See the
Instructions for Form 1120 for more
information on officers' compensation,
including any special rules and limitations
that may apply.
The IC-DISC determines who is an
officer under the laws of the state where it
is incorporated.

Line 1m. Other Export Promotion
Expenses
Enter any other allowable export
promotion expenses not claimed
elsewhere on the return.
Note. Do not deduct fines or penalties
imposed on the IC-DISC.

Line 2b. Taxes and Licenses
Enter taxes paid or accrued during the tax
year, but do not include the following:
Taxes not imposed on the corporation.
Taxes, including state or local sales
taxes, that are paid or incurred in
connection with an acquisition or
disposition of property (these taxes must
be treated as part of the cost of the
acquired property or, in the case of a
disposition, as a reduction in the amount
realized on the disposition).
Taxes assessed against local benefits
that increase the value of the property
assessed (such as for paving, etc.).
Taxes deducted elsewhere on the
return, such as those reflected in cost of
goods sold.
See section 164(d) for apportionment
of taxes on real property between seller
and purchaser.

Line 2c. Interest
Do not deduct the following interest:
Interest on indebtedness incurred or
continued to purchase or carry obligations
if the interest is wholly exempt from
income tax. For exceptions, see section
265(b).
For cash basis taxpayers, prepaid
interest allocable to years following the
current tax year (e.g., a cash basis
calendar year taxpayer who in the current
tax year prepaid interest allocable to any
period after the current tax year may
deduct only the amount allocable to the
current tax year).
Interest on debt allocable to the
production of designated property by a
corporation for its own use. The
corporation must capitalize this interest.
Also capitalize any interest on debt
allocable to an asset used to produce the
property. See section 263A(f) and
Regulations sections 1.263A-8 through
1.263A-15 for definitions and more
information.
Special rules apply to:
Disqualified interest on certain
indebtedness under section 163(j). See
Form 8926, Disqualified Corporate
Interest Expense Under Section 163(j)
and Related Information, and the related
instructions.

-10-

Forgone interest on certain
below-market-rate loans (see section
7872).
Original issue discount on certain
high-yield discount obligations. See
section 163(e) to figure the disqualified
portion.
Interest which is allocable to
unborrowed policy cash values of life
insurance, endowment, or annuity
contracts issued after June 8, 1997. See
section 264(f). Attach a statement
showing the computation of the deduction.

Line 2d. Charitable Contributions
For more information on charitable
contributions, including substantiation and
recordkeeping requirements, see section
170 and the related regulations and Pub.
526, Charitable Contributions. For
limitations on deduction and other special
rules that apply to corporations, see the
Instructions for Form 1120 and Pub. 542.

Line 2e. Freight
Enter freight expense not deducted on
line 1h as export promotion expense.

Line 2g. Other Expenses
Enter any other allowable deduction not
claimed on line 1 or lines 2a through 2f.
The IC-DISC may have to report a
negative section 481(a) adjustment on
line 2g. See Section 481(a) adjustment on
page 7 for additional information.
Generally, a deduction may not be
taken for any amount that is allocable to a
class of exempt income. See section
265(b) for exceptions.
Note. Do not deduct fines or penalties
paid to a government for violating any law.
For more information on other
deductions that may apply to corporations,
see Pub. 535.

Schedule J
Part I—Deemed Distributions
Under Section 995(b)(1)
Line 2. Recognized Gain on
Section 995(b)(1)(B) Property
Enter gain recognized during the tax year
on the sale or exchange of property, other
than property which in the hands of the
IC-DISC was a qualified export asset,
previously transferred to the IC-DISC in a
transaction in which the transferor realized
gain but did not recognize the gain in
whole or in part. See section 995(b)(1)(B).
Show the computation of the gain on a
separate statement. Include no more of
the IC-DISC's gain than the amount of

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

gain the transferor did not recognize on
the earlier transfer.

Line 3. Recognized Gain on
Section 995(b)(1)(C) Property
Enter gain recognized on the sale or
exchange of property described in section
995(b)(1)(C). Show the computation of the
gain on a separate statement. Do not
include any gain included in the
computation of line 2. Include only the
amount of the IC-DISC's gain that the
transferor did not recognize on the earlier
transfer and that would have been treated
as ordinary income if the property had
been sold or exchanged rather than
transferred to the IC-DISC. Do not include
gain on the sale or exchange of IC-DISC
stock-in-trade or other property that either
would be included in inventory if on hand
at the end of the tax year or is held
primarily for sale in the normal course of
business.

Line 4. Income Attributable to
Military Property
Enter 50% of taxable income attributable
to military property (section 995(b)(1)(D)).
Show the computation of this income. To
figure taxable income attributable to
military property, use the gross income
attributable to military property for the year
and the deductions properly allocated to
that income. See Regulations section
1.995-6.

Line 9. Deemed Distributions to C
Corporations
Line 9 provides for the computation of the
one-seventeenth deemed distribution of
section 995(b)(1)(F)(i). Line 9 only applies
to shareholders of the IC-DISC that are C
corporations.

Line 10. International Boycott
Income
An IC-DISC is deemed to distribute any
income that resulted from cooperating with
an international boycott (section 995(b)(1)
(F)(ii)). See Form 5713 to figure this
deemed distribution and for reporting
requirements for any IC-DISC with
operations related to a boycotting country.

Line 11. Illegal Bribes, etc.
An IC-DISC is deemed to distribute the
amount of any illegal payments, such as
bribes or kickbacks, that it pays, directly or
indirectly, to government officials,
employees, or agents (section 995(b)(1)
(F)(iii)).

Line 14. Earnings and Profits
Attach a computation showing the
earnings and profits for the tax year. See

section 312 for rules on figuring earnings
and profits for the purpose of the section
995(b)(1) limitation.

Line 17. Foreign Investment
Attributable to Producer Loans
Line 17a. For shareholders other than
C corporations. To figure the amount for
line 17a, attach a computation showing (1)
the IC-DISC's foreign investment in
producer's loans during the tax year; (2)
accumulated earnings and profits
(including earnings and profits for the
current tax year) minus the amount on
line 15, Part I; and (3) accumulated
IC-DISC income. Enter the smallest of
these amounts (but not less than zero) on
line 17a.
Line 17b. For C corporation shareholders. To figure the amount for line 17b,
attach a computation showing (1) the
IC-DISC's foreign investment in producer's
loans during the tax year; (2) accumulated
earnings and profits (including earnings
and profits for the current tax year) minus
the amount on line 16, Part I; and (3)
accumulated IC-DISC income. Enter the
smallest of these amounts (but not less
than zero) on line 17b.
For purposes of lines 17a and 17b,
foreign investment in producer's loans is
the smallest of (1) the net increase in
foreign assets by members of the
controlled group (defined in section 993(a)
(3)) to which the IC-DISC belongs; (2) the
actual foreign investment by the group's
domestic members; or (3) the IC-DISC's
outstanding producer's loans to members
of the controlled group.
Net increase in foreign assets and
actual foreign investment are defined in
sections 995(d)(2) and (3).
See Regulations section 1.995-5 for
additional information on computing
foreign investment attributable to
producer's loans.
Lines 20 and 21. The percentages on
lines 20 and 21 must add up to 100%.
Line 22. Allocate the line 22 amount to
shareholders that are individuals,
partnerships, S corporations, trusts, and
estates.

Part II—Section 995(b)(1)(E)
Taxable Income

Generally, any taxable income of the
IC-DISC attributable to qualified export
receipts that exceed $10 million will be
deemed distributed.

Line 1. Export Receipts
If there were no commission sales, leases,
rentals, or services for the tax year, enter
on line 1, Part II, the total of lines 1c and
2k, column (e), Schedule B.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

-11-

If there were commission sales, leases,
rentals, or services for the tax year, the
total qualified export receipts to be
entered on line 1, Part II, are figured as
follows (section 993(f)):
1. Add lines 1c and 2k, column
(b), Schedule B . . . . . . . .
2. Add lines 1c and 2k, column
(d), Schedule B . . . . . . . .
3. Add lines 1 and 2. Enter on
line 1, Part II, Schedule J . .

Line 3. Controlled Group
Allocation
If the IC-DISC is a member of a controlled
group (as defined in section 993(a)(3))
that includes more than one IC-DISC, only
one $10 million limit is allowed to the
group. If an allocation is required, a
statement showing each member's portion
of the $10 million limit must be attached to
Form 1120-IC-DISC. See Proposed
Regulations section 1.995-8(f) for details.

Lines 4 and 5. Proration of $10
Million Limit
The $10 million limit (or the controlled
group member's share) is prorated on a
daily basis. Thus, for example, if, for its
2011 calendar tax year, an IC-DISC has a
short tax year of 73 days, and it is not a
member of a controlled group, the limit
that would be entered on line 5 of Part II is
$2,000,000 (73/365 times $10 million).

Line 7. Taxable Income
Enter the taxable income attributable to
line 6, qualified export receipts. The
IC-DISC may select the qualified export
receipts to which the line 5 limitation is
allocated.
See Proposed Regulations section
1.995-8 for details on determining the
IC-DISC's taxable income attributable to
qualified export receipts in excess of the
$10 million amount. Special rules are
provided for allocating the taxable income
attributable to any related and subsidiary
services, and for the ratable allocation of
the taxable income attributable to the first
transaction selected by the IC-DISC that
exceeds the $10 million amount.
Deductions must be allocated and
apportioned according to the rules of
Regulations section 1.861-8. The
selection of the excess receipts by the
IC-DISC is intended to permit the IC-DISC
to allocate the $10 million limitation to the
qualified export receipts of those
transactions occurring during the tax year
that permit the greatest amount of taxable
income to be allocated to the IC-DISC
under the intercompany pricing rules of
section 994.

To avoid double counting of the
deemed distribution, if an amount of
taxable income for the tax year attributable
to excess qualified export receipts is also
deemed distributed under either line 1, 2,
3, or 4 of Part I, such amount of taxable
income is only includible on that line of
Part I, and must be subtracted from the
amount otherwise reportable on line 7 of
Part II and carried to line 5 of Part I. See
Proposed Regulations section 1.995-8(d).
After filing the IC-DISC's current year
tax return, the allocation of the $10 million
limitation and the computation of the line 7
deemed distribution may be changed by
filing an amended Form 1120-IC-DISC
only under the conditions specified in
Proposed Regulations section 1.995-8(b)
(1).

Part III—Deemed Distributions
Under Section 995(b)(2)

If the corporation is a former DISC or a
former IC-DISC that revoked IC-DISC
status or lost IC-DISC status for failure to
satisfy one or more of the conditions
specified in section 992(a)(1) for the
current tax year, each shareholder is
deemed to have received a distribution
taxable as a dividend on the last day of the
current tax year. The deemed distribution
equals the shareholder's prorated share of
the DISC's or IC-DISC's income
accumulated during the years just before
DISC or IC-DISC status ended. The
shareholder will be deemed to receive the
distribution in equal parts on the last day
of each of the 10 tax years of the
corporation following the year of the
termination or disqualification of the
IC-DISC (but in no case over more than
twice the number of years the corporation
was a DISC or IC-DISC).

Part IV—Actual Distributions
Line 1. Distributions To Meet
Qualification Requirements under
Section 992(c)
If the corporation is required to pay
interest under section 992(c)(2)(B) on the
amount of a distribution to meet the
qualification requirements of section
992(c), report this interest on line 2c,
Schedule E. Also include the amount on
line 1, Part IV of Schedule J and show the
computation of the interest on an attached
statement.

Line 4a. Previously Taxed Income
Report on line 4a all actual distributions of
previously taxed income. Also, include any
distributions of pre-1985 accumulated
DISC income that are nontaxable (see the
instructions for Schedule L, line 12,
below). Enter on the dotted line to the left
of the line 4a amount the dollar amount of
the distribution that is nontaxable

pre-1985 DISC income and identify it as
such. Do not include distributions of
pre-1985 DISC income that are made
under section 995(b)(2) because of prior
year revocations or disqualifications.

Part V—Deferred DISC Income
Under Section 995(f)(3)

In general, deferred DISC income is:
1. Accumulated IC-DISC income (for
periods after 1984) of the IC-DISC as of
the close of the computation year, over
2. The amount of
distributions-in-excess-of-income for the
tax year of the IC-DISC following the
computation year.

For purposes of item 2 above,
distributions-in-excess-of-income means
the excess (if any) of:
Actual distributions to shareholders out
of accumulated IC-DISC income, over
The amount of IC-DISC income (as
defined in section 996(f)(1)) for the tax
year following the computation year.
For purposes of items 1 and 2 above,
see section 995(f) and Proposed
Regulations section 1.995(f)-1 for a
definition of computation year, examples,
and other details on figuring deferred
DISC income.
The amount on line 3, Part V, is
allocated to each shareholder on line 10,
Part III, of Schedule K (Form
1120-IC-DISC).
Shareholders of an IC-DISC must file
Form 8404 if the IC-DISC reports deferred
DISC income on line 10, Part III of
Schedule K.

Schedule K
Shareholder's Statement of
IC-DISC Distributions

Attach a separate Copy A, Schedule K
(Form 1120-IC-DISC), to Form
1120-IC-DISC for each shareholder who
received an actual or deemed distribution
during the tax year or to whom the
corporation reported deferred DISC
income for the tax year.

Schedule L
Balance Sheets per Books

The balance sheet should agree with the
IC-DISC's books and records. Include
certificates of deposits as cash on line 1.

Line 12. Accumulated Pre-1985
DISC Income
If the corporation was a qualified DISC as
of December 31, 1984, the accumulated
pre-1985 DISC income will generally be
treated as previously taxed income
(exempt from tax) when distributed to
-12-

DISC shareholders after December 31,
1984.
Exception: The exemption does not
apply to distributions of accumulated
pre-1985 DISC income of an IC-DISC or
former DISC that was made taxable under
section 995(b)(2) because of a prior
revocation of the DISC election or
disqualification of the DISC. For more
details on these distributions, see
Temporary Regulations section
1.921-1T(a)(7).

Line 13. Accumulated IC-DISC
Income
Accumulated IC-DISC income (for periods
after 1984) is accounted for on line 13 of
Schedule L. The balance of this account is
used in figuring deferred DISC income in
Part V of Schedule J.

Schedule N
Export Gross Receipts
of the IC-DISC and Related U.S.
Persons
Line 1. Product Code and
Percentage
Enter in line 1a the code number and
percentage of total export gross receipts
(defined below), for the product or service
that accounts for the largest portion of the
IC-DISC's export gross receipts. The
product codes are on page 14 of these
instructions. On line 1b enter the same
information for the IC-DISC's next largest
product or service.
Example: An IC-DISC has export
gross receipts of $10 million. Selling
agricultural chemicals accounts for $4.5
million (45%) of that amount, which is the
IC-DISC's largest product or service. The
IC-DISC should enter “287” (the product
code for agricultural chemicals) and “45%”
in line 1a.
Selling industrial chemicals accounts
for $2 million (20% of the $10 million total)
and is the IC-DISC's second largest
product or service. The IC-DISC should
enter “281” (the product code for industrial
inorganic and organic chemicals) and
“20%” in line 1b.

Line 2. Definitions
Export gross receipts are receipts from
any of the following.
Providing engineering or architectural
services for construction projects located
outside the United States.
Selling for direct use, consumption, or
disposition outside the United States,
property (such as inventory) produced in
the United States.
Renting this property to unrelated
persons for use outside the United States.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

Providing services involved in such a
sale or rental.
Providing export management services.

An estate or trust (other than a foreign
estate or trust as defined in section
7701(a)(31)).

For commission sales, export gross
receipts include the total receipts on which
the IC-DISC earned the commission.

Export Gross Receipts

For purposes of line 2, Schedule N
only, no reduction is to be made for
receipts attributable to military property.
Therefore, an IC-DISC's export gross
receipts for purposes of line 2 includes the
total of the amounts from page 2,
Schedule B, columns (b) and (d) of lines
1c, 2a, 2b, 2c, and 2d.
Related persons are:
An individual, partnership, estate, or
trust that controls the IC-DISC;
A corporation that controls the IC-DISC
or is controlled by it; or
A corporation controlled by the same
person or persons who control the
IC-DISC.
Control means direct or indirect
ownership of more than 50% of the total
voting power of all classes of stock
entitled to vote. See section 993(a)(3).
U.S. person is:
A citizen or resident of the United
States, which includes the Commonwealth
of Puerto Rico and possessions of the
United States;
A domestic corporation or partnership;
or

Schedule O
Other Information

Column (a). All IC-DISCs should
complete column (a) in line 2. If two or
more IC-DISCs are related persons, only
the IC-DISC with the largest export gross
receipts should complete columns (b) and
(c). If an IC-DISC acts as a commission
agent for a related person, attribute the
total amount of the transaction to the
IC-DISC.
Complete column (a) to report the
IC-DISC's export gross receipts from all
sources (including the United States) for
the current tax year.
Column (b). Export gross receipts of
related IC-DISCs. Complete column (b)
to report related IC-DISCs' export gross
receipts from all sources (including the
United States).
Column (c). Export gross receipts of
all other related U.S. persons.
Complete column (c) to report other
related U.S. persons' export gross
receipts from all sources except the
United States.

Question 6. Boycott of Israel. If
question 6a, 6b, or 6c is checked “Yes,”
the IC-DISC must file Form 5713 and is
also deemed to distribute part of its
income. See Form 5713 for more
information.
Question 7. Tax-exempt interest.
Report any tax-exempt interest received
or accrued. Include any exempt-interest
dividends received as a shareholder in a
mutual fund or other regulated investment
company.
Question 8. Foreign owner. If the
answer to questions 8(a) or 8(b) is "Yes,"
enter on line 8(b)a the percentage owned.
On line 8(b)b, enter the owner's country,
and on line 8(b)c, if Form 5472,
Information Return of a 25%
Foreign-Owned U.S. Corporation
Engaged in a U.S. Trade or Business, is
filed by the corporation, enter the number
of Forms 5472 attached.

Schedule P
Intercompany Transfer Price or
Commission

Line 3. Related U.S. Persons
Enter on line 3 the name, address, and
identifying number of related U.S. persons
in your controlled group.

Complete and attach a separate
Schedule P (Form 1120-IC-DISC) for each
transaction or group of transactions to
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 the following forms will vary depending on individual circumstances. The estimated average
times are:
Recordkeeping

Learning about the law
or the form

Preparing the form

Copying, assembling, and
sending the form to the
IRS

1120-IC-DISC

89 hr., 26 min.

21 hr., 52 min.

39 hr., 12 min.

4 hr., 17 min.

Schedule K

 4 hr., 18 min.

     47 min.

     54 min.

———

Schedule P

12 hr., 54 min.

1 hr., 35 min.

1 hr., 52 min.

———

Form

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 may write to the Internal Revenue Service, Tax Products Coordinating Committee,
SE:W:CAR:MP:T:M:S, 1111 Constitution Ave. NW, IR-6526, Washington, D.C. 20224. Do not send these tax forms to this office.
Instead, see Where To File on page 2.

Instructions for Form 1120-IC-DISC (Rev. 12-2012)

-13-

Form 1120-IC-DISC Codes for Principal Business Activity
This list of principal business activities and their associated codes is
designed to classify an enterprise by the type of activity in which it is
engaged to facilitate the administration of the Internal Revenue
Code. These principal business activity codes are based on the
North American Industry Classification System. Certain activities,
such as manufacturing, do not apply to an IC-DISC.
Using the list below, enter on page 1, item B, the code number for
the specific industry group from which the largest percentage of

Wholesale Trade
Merchandise Wholesalers, Durable
Goods
423100 Motor Vehicle & Motor
Vehicle Parts & Supplies
423200 Furniture & Home Furnishings
423300 Lumber & Other Construction
Materials
423400 Professional & Commercial
Equipment & Supplies
423500 Metal & Mineral (except
Petroleum)
423600 Electrical & Electronic Goods
423700 Hardware, & Plumbing &
Heating Equipment, & Supplies
423800 Machinery, Equipment, &
Supplies
423910 Sporting & Recreational Goods
& Supplies
423920 Toy & Hobby Goods & Supplies
423930 Recyclable Materials
423940 Jewelry, Watch, Precious
Stone, & Precious Metals
423990 Other Miscellaneous Durable
Goods
Merchandise Wholesalers,
Nondurable Goods
424100 Paper & Paper Products

total gross receipts is derived. Total receipts means all income (line
1, page 1).
On page 6, Schedule O, line 1, enter the principal business activity
and principal product or service that account for the largest
percentage of total receipts. For example, if the principal activity is
“Wholesale Trade Durable Goods: Machinery, Equipment, &
Supplies,” the principal product or service may be “Engines and
Turbines.”

424210 Drugs & Druggists’ Sundries
424300 Apparel, Piece Goods, &
Notions
424400 Grocery & Related Products
424500 Farm Product Raw Materials
424600 Chemical & Allied Products
424700 Petroleum & Petroleum
Products
424800 Beer, Wine, & Distilled
Alcoholic Beverage
424910 Farm Supplies
424920 Book, Periodical, &
Newspapers
424930 Flower, Nursery Stock, &
Florists’ Supplies
424940 Tobacco & Tobacco Products
424950 Paint, Varnish, & Supplies
424990 Other Miscellaneous
Nondurable Goods

Information

Motion Picture and Sound
Recording Industries
512100 Motion Picture & Video
Industries (except video
rental)
512200 Sound Recording Industries
Broadcasting (except Internet)
515100 Radio & Television
Broadcasting
515210 Cable & Other Subscription
Programming
Telecommunications
517000 Telecommunications
(including paging, cellular,
satellite, cable & other
program distribution,
resellers, other
telecommunications, &
internet service providers)
Data Processing Services
518210 Data Processing, Hosting, &
Related Services

Publishing Industries (except
Internet)
511110 Newspaper Publishers
511120 Periodical Publishers
511130 Book Publishers
511140 Directory & Mailing List
Publishers
511190 Other Publishers
511210 Software Publishers

Other Information Services
519100 Other Information Services
(including news syndicates,
libraries, internet publishing &
broadcasting)

Rental and Leasing
Rental and Leasing Services
532100 Automotive Equipment Rental
& Leasing
532210 Consumer Electronics &
Appliances Rental
532220 Formal Wear & Costume
Rental
532230 Video Tape & Disc Rental
532290 Other Consumer Goods
Rental
532310 General Rental Centers
532400 Commercial & Industrial
Machinery & Equipment
Rental & Leasing

Professional Services
Architectural, Engineering, and
Related Services
541310 Architectural Services
541320 Landscape Architecture
Services
541330 Engineering Services
541340 Drafting Services
541350 Building Inspection Services
541360 Geophysical Surveying &
Mapping Services
541370 Surveying & Mapping (except
Geophysical) Services
541380 Testing Laboratories
Other Professional Services
541600 Management Services

Schedule P (Form 1120-IC-DISC) Codes for Principal Business Activity
(These codes are used only with Schedule P (Form 1120-IC-DISC)).
These codes for the Principal Business Activity are designed to
classify enterprises by the type of activity in which they are engaged
to facilitate the administration of the Internal Revenue Code. Certain
activities such as manufacturing do not apply to an IC-DISC.

Transportation,
Communication, Electric,
Gas, and Sanitary Services
Code
Transportation
4400 Water transportation
4700 Other transportation services
Electric, gas, and sanitary services
4910 Electric services
4920 Gas production and distribution
4930 Combination utility services

Wholesale Trade
Durable
5008 Machinery, equipment, and
supplies
5010 Motor vehicles and automotive
equipment
5020 Furniture and home furnishings
5030 Lumber and construction
materials

Using the list below, enter on each Schedule P, the code for the
specific industry group and the product or product line for which the
Schedule P is completed.

Code

Retail Trade

5040 Sporting, recreational,
photographic, and hobby
goods, toys, and supplies
5050 Metals and minerals, except
petroleum and scrap
5060 Electrical goods
5070 Hardware, plumbing and heating
equipment
5098 Other durable goods

Code

Nondurable
5110 Paper and paper products
5129 Drugs, drug proprietaries, and
druggists’ sundries
5130 Apparel, piece goods, and
notions
5140 Groceries and related products
5150 Farm-product raw materials
5160 Chemicals and allied products
5170 Petroleum and petroleum
products
5180 Alcoholic beverages
5190 Miscellaneous nondurable
goods

Building materials, hardware, garden
supply, mobile home dealers,
general merchandise, and food
stores
5220 Building materials dealers
5251 Hardware stores
5265 Garden supplies and mobile
home dealers
5300 General merchandise stores
5410 Grocery stores
5490 Other food stores
Automotive dealers and service
stations
5515 Motor vehicle dealers
5541 Gasoline service stations
5598 Other automotive dealers
5600 Apparel and accessory stores
5700 Furniture and home furnishings
stores
5800 Eating and drinking places
Miscellaneous retail stores
5912 Drug stores and proprietary
stores
5921 Liquor stores
5995 Other miscellaneous retail stores

-14-

Finance, Insurance, and Real
Estate
Code
Credit agencies other than banks
6199 Other credit agencies

Services
Business services
7389 Export management services
Auto repair and services;
miscellaneous repair services
7500 Lease or rental of motor
vehicles
Amusement and recreation services
7812 Motion picture production,
distribution, and services
Other services
8911 Architectural and engineering
services
8930 Accounting, auditing, and
bookkeeping
8980 Miscellaneous services

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.
Nonmanufactured Product Groups and Services
Code
011
012
013
014
015
019
021
022
023
024
029
101
102
103
110
130
147
148
730
737
780
850
988
990

Grains, including soybeans
Vegetables and melons
Fruit and tree nuts
Greenhouse, nursery, and floriculture
Cotton
Other crops (including sugar beets, peanuts,
spices, hops, and vegetable seeds)
Livestock
Poultry and eggs
Fishery products and services (including shellfish)
Fur bearing animals and unfinished hides
Other animal products
Iron ores
Precious metals (including gold and silver)
Other ores
Coal mining products
Secondary petroleum and natural gas products
Nonmetallic mineral products and services
(including limestone, sulfur, and fertilizer)
Sand, gravel, and clay
Export management services
Computer software
Motion picture distribution
Engineering and architectural services
Leasing--other property (except aircraft)
Other nonmanufactured products
Manufactured Product Groups

Ordnance and accessories
191
192
194
195
196
199

Code

Code

Furniture and fixtures

Guns, howitzers, mortars, and related equipment
Ammunition (except small arms)
Sighting and fire control equipment
Small arms
Small arms ammunition
Other ordnance and accessories

251
252
253
259

Household furniture
Office furniture
Public building and related furniture
Other furniture and fixtures

Paper and allied products
261
262
263
264
265
266
269

Pulp
Newsprint
Business machine paper
Stationery and office supplies (including pens
and pencils)
Paperboard (including containers and boxes)
Paper bags and coated and treated paper
(including wallpaper and gift wrap)
Other paper and allied products

Printed media
271
272
273
274
275
279

Newspapers
Periodicals
Books
Greeting cards
Manifold business forms
Other printed media

Chemicals and allied products
281
282
283
284
285
286
287
289

Industrial inorganic and organic chemicals
Plastics materials, synthetic resins, synthetic
rubber, and synthetic fibers
Drugs
Soap, detergents, and cleaning preparations,
perfumes, cosmetics, and toiletries
Paints, varnishes, lacquers, enamels, and allied
products
Gum and wood chemicals
Agricultural chemicals
Other chemicals and allied products

Food and kindred products
201
202
203
204
205
206
207
208
209

Meat products
Dairy products
Fruits, vegetables, and seafood
Grain mill products
Bakery products
Sugar
Confectionery and related products
Beverages
Other food and kindred products

Tobacco products
211
212
213

Cigarettes
Cigars
Tobacco (chewing and smoking) and snuff

Textile mill products
221
222
223
224
225
226
227
228
229

Broad woven cotton fabrics
Broad woven synthetic fibers and silk fabrics
Broad woven wool fabrics
Narrow fabrics
Knit fabrics
Dyed and finished textiles
Carpets and rugs
Yarns and threads
Other textile goods

Apparel and other finished goods
231
233
238
239

Men’s and boys’ clothing and furnishings
Women’s, children’s and infants’ clothing and
accessories (including fur goods and millinery)
Footwear (except rubber and leather)
Other apparel and accessories

Refined petroleum and related products
291
295
299

Rubber and plastics products
301
302
303
306
309

244
249

Logs and log products
Lumber construction materials (including
millwork, veneer, plywood and prefabricated
structural wood products)
Wooden containers
Other lumber and wood products

Tires and inner tubes
Rubber footwear
Reclaimed rubber
Fabricated rubber products
Other rubber and plastics products

Leather and leather products
311
312
313
314
315
316
317
319

Tanned and finished leather
Industrial leather belting and packing
Boot and shoe cut stock and findings
Leather footwear
Leather gloves and mittens
Leather luggage
Leather handbags and other personal leather
goods
Other leather and leather products

Stone, clay, glass, and concrete products
321
322
323
324
325
326
327
328
329

Lumber and wood products (except furniture)
241
243

Refined petroleum
Paving and roofing materials
Other petroleum and related products

Flat glass
Glass and glassware, pressed and blown
Glass products, made or purchased glass
Cement, hydraulic
Structural clay products
Pottery and related products
Concrete, gypsum, and plaster products
Cut stone and stone products
Abrasive, asbestos, and other nonmetallic mineral
products

Fabricated metal products (except ordnance,
machinery and transportation)
341
342
343
344
345
346
347
349

Machinery (except electrical and electronic)
351
352
353
354
355
356
357
359

Iron and steel products
Nonferrous metal products
Other primary and secondary nonfabricated metal
products

-15-

Engines and turbines
Farm machinery and equipment
Construction, mining, and materials handling
machinery and equipment
Metalworking machinery and equipment
Special industry machinery (except metalworking
machinery)
General industrial machinery and equipment
Service industry machinery
Other machinery (except electrical and electronic)

Electrical and electronic machinery, equipment, and
supplies
361

362
363
364
365
366
367
368
369

Electric power transmission and distribution
equipment (including transformers, motors and
generators)
Electrical office equipment (including
photocopying machines and calculators)
Household appliances
Electric lighting and wiring equipment
Audio and video equipment (except
communication types)
Communication equipment
Semiconductors, capacitors, resistors, and other
electronic components
Computer and peripheral equipment
Other electrical and electronic machinery,
equipment, and supplies

Transportation equipment
371
372
373
374
375
376
378
379

Motor vehicles and motor vehicle equipment
Aircraft and aircraft parts and equipment
Leased aircraft
Ships and nautical equipment
Railroad equipment
Motorcycles, bicycles, and parts
Tanks and tank components
Other transportation equipment

Professional, scientific, and controlling instruments;
photographic and optical goods; watches and clocks
381
382
383
384
385
386
387

Engineering, laboratory, and scientific and
research instruments and associated equipment
Instruments for measuring, controlling, and
indicating physical characteristics
Optical instruments, lenses, binoculars,
microscopes, telescopes, and prisms
Surgical, medical, and dental instruments and
supplies
Ophthalmic goods
Photographic equipment and supplies
Watches and clocks

Other manufactured products
391
393
394
395
396

Primary and secondary nonfabricated metal products
331
332
339

Metal cans
Cutlery, hand tools, and general hardware
Heating apparatus (except electric) and plumbing
fixtures
Fabricated structural metal products
Screw machine products and bolts, nuts, screws,
rivets, and washers
Metal stampings
Coated and engraved metal products
Other fabricated metal products

399

Jewelry, silverware, and plated ware
Musical instruments
Toys, amusement, sporting, and athletic goods
Artists’ materials
Costume jewelry, costume novelties, buttons,
and other notions (except precious metal)
Other manufactured products