Instructions for

Form 1120-IC-DISC

(Rev. December 2021)

Interest Charge Domestic International

Sales Corporation Return

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue 

Code unless otherwise noted.

Contents Page

General Instructions ............. 1

Purpose of Form ............... 1

Who Must File ................ 1

When To File ................. 2

Where To File ................. 2

Who Must Sign ................ 2

Other Forms and Statements That 

May Be Required ........... 2

Assembling the Return ........... 2

Accounting Methods ............ 2

Accounting Periods ............. 3

Rounding Off to Whole Dollars ...... 3

Recordkeeping ................ 3

Definitions ................... 3

Penalties .................... 4

Specific Instructions ............. 5

Schedule A .................. 6

Schedule B .................. 7

Schedule C .................. 8

Schedule E ................. 10

Schedule J ................. 11

Schedule K (Form 

1120-IC-DISC) ............ 13

Schedule L ................. 13

Schedule N ................. 13

Schedule O ................. 14

Schedule P (Form 

1120-IC-DISC) ............ 14

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 IRS.gov/

Form1120ICDISC.

What’s New

Schedule C, line 14, formerly related to 

section 965(a), which is no longer 

applicable for tax years after 2020, is now 

reserved for future use.

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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.

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.

• 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, later, 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 

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 the IC-DISC did not meet the qualified 

export asset test, the distribution equals 

the fair market value (FMV) 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 generally 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 (EIN); 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 

Dec 30, 2021 Cat. No. 11476W
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.

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.

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 the IC-DISC's 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.

Where To File

If you are using the U.S. Postal Service, 

file Form 1120-IC-DISC at the following 

address:

Department of the Treasury

Internal Revenue Service Center

Kansas City, MO 64999

Private delivery services (PDSs). 

Corporations may use certain PDSs 

designated by the IRS to meet the “timely 

mailing as timely filing” rule for tax returns. 

Go to IRS.gov/PDS.

The PDS can tell you how to get written 

proof of the mailing date.

For the IRS mailing address to use if 

you’re using a PDS, go to IRS.gov/

PDSstreetAddresses.

Private delivery services cannot 

deliver items to P.O. boxes. You 

must use the U.S. Postal Service 

to mail any item to an IRS P.O. box 

address.

CAUTION

!

Who Must Sign

The return must be signed and dated by:

• The president, vice president, treasurer, 

assistant treasurer, chief accounting 

officer; or

• Any other corporate officer (such as tax 

officer) authorized to sign.

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.

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, and

• 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

Informing Shareholders

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). If property is transferred to 

a corporation subject to section 362(e)(2), 

the transferor and the acquiring 

corporation may elect, under section 

362(e)(2)(C), to reduce the transferor's 

basis in the stock received instead of 

reducing the acquiring corporation's basis 

in the property transferred. Once made, 

the election is irrevocable. For more 

information, see section 362(e)(2) and 

Regulations section 1.362-4. If an election 

is made, a statement must be filed in 

accordance with Regulations section 

1.362-4(d)(3).

Form 8992. Use Form 8992 to figure the 

domestic corporation's GILTI under 

section 951A and attach it to Form 

1120-IC-DISC.

Form 8993. Use Form 8993 to figure the 

amount of the eligible deduction for FDII 

and GILTI under section 250 and attach it 

to Form 1120-IC-DISC.

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 the last 

page of Form 1120-IC-DISC, and in the 

following order.

1. Schedule N (Form 1120).

2. Form 4136.

3. Schedule D (Form 1120).

4. Form 8992.

5. Form 8993.

6. Additional schedules in 

alphabetical order.

7. 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. For 

more information, see Pub. 538, 

Accounting Periods and Methods.

-2- Instructions for Form 1120-IC-DISC (Rev. 12-2021)
• An IC-DISC must use the accrual 

method of accounting if its average annual 

gross receipts for the 3 prior tax years 

exceed $26 million. However, see 

Nonaccrual experience method for service 

providers, later.

• Unless it is a small business taxpayer 

(defined below), an IC-DISC must use the 

accrual method for sales and purchases of 

inventory items. See Cost of Goods Sold, 

later.

• 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 

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.

Small business taxpayer. A small 

business taxpayer is a taxpayer that (a) 

has average annual gross receipts of $26 

million or less for the 3 prior tax years, and 

(b) is not a tax shelter (as defined in 

section 448(d)(3)). See section 471(c).

A small business taxpayer can adopt or 

change its accounting method to account 

for inventories (a) in the same manner as 

materials and supplies that are 

nonincidental, or (b) to conform to its 

treatment of inventories in an applicable 

financial statement (as defined in section 

451(b)(3)). If it does not have an 

applicable financial statement, it can use 

the method of accounting used in its 

books and records prepared according to 

its accounting procedures. See section 

471(c)(1).

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 the Instructions for Form 3115 and 

Pub. 538 for more information and 

exceptions. Also see Rev. Proc. 2018-31, 

2018-22 I.R.B. 637 (or any successor).

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. 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 later).

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. Qualified 

export assets are any of the following.

1. Export property (defined later).

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, earlier, or 

managerial services in furtherance of the 

production of qualified export receipts 

described in items 1, 2, 3, and 7, earlier.

3. Accounts receivable and evidences 

of indebtedness produced by transactions 

listed under Qualified export receipts, 

items 1–4, 7, and 8, earlier.

4. Temporary investments, such as 

money and bank deposits, in an amount 

reasonable to meet the IC-DISC's needs 

for working capital.

5. Obligations related to a producer's 

loan (defined later).

6. Stock or securities of a related 

foreign export corporation (defined later).

7. Certain obligations that are issued, 

guaranteed 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.

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

FMV 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. 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. 

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, earlier, and interest on the 

qualified export assets listed in items 3 

and 4 of Qualified export assets, earlier; 

and

• The adjusted basis of the qualified 

export assets in items 1–4 of Qualified 

export assets, earlier, 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 at the end of such tax year.

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. 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.

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 

-4- Instructions for Form 1120-IC-DISC (Rev. 12-2021)
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;

• Form 944, Employer's Annual 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 full amount of 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

Entity Information

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.

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 – Go to IRS.gov/EIN. The EIN is 

issued immediately once the application 

information is validated.

• By faxing or mailing Form SS-4, 

Application for Employer Identification 

Number. Corporations located in the 

United States or U.S. possessions can 

use the online application. Foreign 

corporations should call 267-941-1099 

(not a toll free number) for more 

information on obtaining an EIN. See the 

Instructions for Form SS-4.

EIN applied for but not received. If the 

corporation has not received its EIN by the 

time the return is due, enter "Applied For" 

and the date the corporation applied in the 

space for the EIN. However, if the 

corporation is filing its return electronically, 

an EIN is required at the time the return is 

filed. An exception applies to subsidiaries 

of corporations whose returns are filed 

with the parent's electronically filed 

consolidated Form 1120. These 

subsidiaries should enter "Applied For" in 

the space for the EIN on their returns. The 

subsidiaries' returns are identified under 

the parent corporation's EIN.

For more information, see the 

Instructions for Form SS-4.

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 or 

responsible party occurs after the return is 

filed, use Form 8822-B, Change of 

Address or Responsible Party —

Business, to notify the IRS. See the 

instructions for Form 8822-B for details.

• If the IC-DISC changed its name since it 

last filed a return, check the box for “Name 

change.” Generally, an IC-DISC must also 

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 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 (NOL) 

Deduction

The NOL deduction is the amount of the 

NOL carryover and NOL carryback. The 

2-year carryback rule does not apply to 

NOLs arising in tax years ending after 

December 31, 2017. Exceptions apply to 

NOLs of certain farming losses and NOLs 

of insurance companies (other than life 

insurance companies). See section 172(b) 

for details.

The following special rules apply. The 

corporation may elect under section 

965(n) to reduce the amount of the NOL 

for a tax year and the amount of taxable 

income reduced by NOL carryovers or 

carrybacks to such tax year. See section 

965(n) for more information.

Line 7. Taxable Income

If the IC-DISC uses either the gross 

receipts method or combined taxable 

income method to figure 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.

Net operating loss (NOL). If line 7 

(figured without regard to the items listed 

above under minimum taxable income) is 

zero or less, the corporation may have an 

NOL that can be carried back or forward 

as a deduction to other tax years. 

Generally, a corporation first carries back 

an NOL attributable to farming losses 2 

tax years. However, the corporation can 

elect to waive the carryback period and 

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -5-
instead carry the farming NOL forward to 

future tax years. See the Instructions for 

Form 1139 for other special rules and 

elections.

Note. The NOL is limited to 80% of 

taxable income (determined without 

regard to the net operating loss) for losses 

arising in tax years beginning after 

December 31, 2017.

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. If inventories are 

required, you must generally use an 

accrual method of accounting for sales 

and purchases of inventory items.

Exceptions for certain taxpayers. A 

small business taxpayer (defined below) 

can adopt or change its accounting 

method to account for inventories in the 

same manner as materials and supplies 

that are nonincidental, or conform to its 

treatment of inventories in an applicable 

financial statement (as defined in section 

451(b)(3)) (or the method of accounting 

used in its books and records prepared in 

accordance with its accounting 

procedures, if applicable financial 

statements are not used). See section 

471(c)(1).

If you account for inventories in the 

same manner as nonincidental materials 

and supplies, inventory costs for raw 

materials purchased for use in producing 

finished goods and merchandise 

purchased for resale are deductible in the 

year the finished goods or merchandise 

are sold (but not before the year you paid 

for the raw materials or merchandise, if 

you are also using the cash method).

Under this accounting method, you can 

currently deduct expenditures for direct 

labor and all indirect costs that would 

otherwise be included in inventory costs. 

See the instructions for lines 2 and 7.

A small business taxpayer claiming 

exemption from the requirement to keep 

inventories is changing its method of 

accounting for purposes of section 481. 

For additional guidance on this method of 

accounting, see Pub. 538. For guidance 

on adopting or changing to this method of 

accounting, see Form 3115 and its 

instructions.

Small business taxpayer. A small 

business taxpayer is a taxpayer that (a) 

has average annual gross receipts of $26 

million or less (indexed for inflation) for the 

3 preceding tax years, and (b) is not a tax 

shelter (as defined in section 448(d)(3)). 

See section 471(c).

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, later, 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.

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).

A small business taxpayer is not 

required to capitalize costs under section 

263A. See section 263A(i).

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 

nonincidental materials and supplies, 

enter on line 7 the portion of your raw 

materials and merchandise purchased for 

resale that was included in the total on 

line 6 but 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 later.

However, if the IC-DISC is using the 

cash method of accounting, it is required 

to use cost.

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. See 

the Instructions for Form 3115. Also see 

Pub. 538.

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 

-6- Instructions for Form 1120-IC-DISC (Rev. 12-2021)
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). Bona fide 

selling price means actual offering of 

goods during a period ending not later 

than 30 days after inventory date.

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 computed 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 (Schedule B, 

line 2j or 3f), proportionately over a 3-year 

period that begins with the year of the 

LIFO election.

Schedule B

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 services that, on the basis 

of their experience, will not be collected, if:

• The services are in the fields of health, 

law, engineering, architecture, accounting, 

actuarial science, performing arts, or 

consulting; or

• The corporation's average annual gross 

receipts for any prior 3-tax-year period 

does not exceed $26 million. For more 

details, see section 448(d)(5).

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. See 

Regulations section 1.448-2 for 

information on the nonaccrual experience 

method, including information on safe 

harbor methods. For information on a 

book safe harbor method of accounting for 

corporations that use the nonaccrual 

experience method of accounting, see 

Rev. Proc. 2011-46, 2011-42 I.R.B. 518, 

as modified by Rev. Proc. 2016-29, 

2016-21 I.R.B. 880. Also see the 

Instructions for Form 3115 for 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.

For purposes of completing lines 1a 

and 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 

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -7-
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 2e. Qualified dividends and 

inclusions from Schedule C, line 19a.

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.

In addition to Schedule D (Form 1120), 

attach a separate statement figuring 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 figuring 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. See the Instructions for Form 

3115 for more information.

Include any net positive section 481(a) 

adjustment on 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 

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 3e. Nonqualified dividends and 

inclusions from Schedule C, line 20a.

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, earlier, for 

additional information.

Schedule C

Dividends, Inclusions, and 

Special Deductions

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 

certain 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 50% deduction under 

section 243(a)(1).

Also include the following on line 1.

• Taxable distributions from an IC-DISC 

or former DISC that are designated as 

being eligible for the 50% deduction and 

certain dividends of Federal Home Loan 

Banks. See section 246(a)(2).

• Dividends received (except those 

received on certain 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 

certain 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 65% deduction 

under section 243(c), and

• Taxable distributions from an IC-DISC 

or former DISC that are considered 

eligible for the 65% deduction.

Line 3, Column (a)

Enter the following.

• Dividends received on certain 

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 (for example, it borrowed money to 

buy the stock).

• Dividends 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)

Dividends received on certain 

debt-financed stock acquired after July 18, 

1984, are not entitled to the full 50% or 

65% dividends-received deduction. The 

50% or 65% 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.

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 

-8- Instructions for Form 1120-IC-DISC (Rev. 12-2021)
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 50% deduction under 

section 245(a). To qualify for the 50% 

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 65% 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.

Line 9, Column (c)

Generally, line 9, column (c), may not 

exceed the amount from the following 

worksheet. 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 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 65% 

(0.65) .............

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 50% 

(0.50) .............

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 10, Column (a)

Enter the foreign-source portion of 

dividends that:

• Are received from specified 

10%-owned foreign corporations (as 

defined in section 245A(b)), including gain 

from the sale of stock of a foreign 

corporation that is treated as a dividend 

for purposes of applying section 245A 

under section 1248(a) and (j); and

• Qualify for the 100% deduction under 

section 245A excluding any hybrid 

dividends.

Line 11, Column (a)

Enter foreign dividends not reportable on 

line 3, 6, 7, 8, or 10 of column (a).

• Include on line 11 any hybrid dividends 

from a controlled foreign corporation 

(CFC). Hybrid dividends are generally 

dividends received from a CFC that would 

otherwise be reported on line 10 except 

the CFC receives a deduction (or other tax 

benefit) with respect to any income, war 

profits, or excess profits taxes imposed by 

any foreign country or possession of the 

United States.

• Also include on line 11 the corporation's 

share of distributions from a section 1291 

fund from Form 8621, to the extent that 

the amounts are taxed as dividends under 

section 301. See Form 8621 and the 

Instructions for Form 8621.

Lines 12a, 12b, and 12c, Column 

(a)

Enter Subpart F inclusions derived from 

the sale by a CFC.

• Line 12a: Enter the foreign-source 

portion of any Subpart F inclusions 

attributable to the sale or exchange by a 

CFC of stock in another foreign 

corporation described in section 964(e)

(4). This should equal the U.S. 

shareholder's pro rata share of the amount 

reported on Form 5471, Information 

Return of U.S. Persons With Respect to 

Certain Foreign Corporations, Schedule I, 

line 1a.

• Line 12b: Enter the pro rata share of 

Subpart F inclusions attributable to hybrid 

dividends of tiered corporations under 

section 245A(e)(2). This should equal the 

U.S. shareholder's pro rata share of the 

amount reported on Form(s) 5471, 

Schedule I, line 1b.

• Line 12c: Enter all other amounts 

included in income under section 951, 

which should equal the U.S. shareholder's 

pro rata share of the sum of the amounts 

on lines 1(c), 1(d), 1(e), 1(f), 2, 3, and 4 of 

Schedule I of Form(s) 5471.

Line 13, Column (a)

Enter amounts included in income under 

the section 951A GlLTI provision from 

Form 8992, Part II, line 5. If you also have 

a Form 5471 reporting requirement, 

please attach Form 5471.

Line 14, Column (a)

Reserved for future use.

Line 14, Column (c)

Reserved for future use.

Line 15, 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 50% 

deduction.

• 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 

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -9-
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 in item 1.

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 17, Column (c)

Enter the section 250 deduction claimed 

for FDII and GILTI. This should equal the 

sum of lines 8 and 9 of Form 8993, Part IV.

Line 19, 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 and A related 

foreign export corporation under Section 

993, earlier, for more details.

Schedule E

Deductions

Limitations on Deductions

Section 263A uniform capitalization 

rules. The uniform capitalization rules of 

section 263A require corporations to 

capitalize, or include in inventory, certain 

costs incurred in connection with the 

following.

• The production of real property and 

tangible personal property held in 

inventory or held for sale in the ordinary 

course of business.

• Real property or personal property 

(tangible and intangible) 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 of assets produced or 

acquired for resale, and

2. Certain indirect costs (including 

taxes) that are properly allocable to 

property produced or property acquired for 

resale.

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. The 

corporation recovers these costs through 

depreciation, amortization, or cost of 

goods sold.

Note. A small business taxpayer (defined 

earlier) is not required to capitalize costs 

under section 263A. A small business 

taxpayer that wants to discontinue 

capitalizing costs under section 263A 

must change its method of accounting. 

See section 263A(i). Also see Change in 

accounting method, earlier.

For more details on the uniform 

capitalization rules, see Regulations 

sections 1.263A-1 through 1.263A-3 and 

Pub. 538.

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) 

and 267(a)(2) for limitations on deductions 

for unpaid interest and expenses.

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, later.

Election to deduct business start-up 

and organizational costs. A 

corporation can elect to deduct a limited 

amount of start-up and organizational 

costs it paid or incurred. Any remaining 

costs must generally be amortized over a 

180-month period. See sections 195 and 

248 and the related regulations.

Time for making an election. The 

corporation generally elects to deduct 

start-up or organizational costs by 

claiming the deduction on its income tax 

return filed by the due date (including 

extensions) for the tax year in which the 

active trade or business begins. However, 

for start-up or organizational costs paid or 

incurred before September 9, 2008, the 

corporation is required to attach a 

statement to its return to elect to deduct 

such costs.

For more details, including special 

rules for costs paid or incurred before 

September 9, 2008, see the Instructions 

for Form 4562. Also see Pub. 535, 

Business Expenses.

If the corporation timely filed its return 

for the year without making an election, it 

can still make an election by filing an 

amended return within 6 months of the 

due date of the return (excluding 

extensions). Clearly indicate the election 

on the amended return and write "Filed 

pursuant to section 301.9100-2" at the top 

of the amended return. File the amended 

return at the same address the corporation 

filed its original return. The election 

applies when figuring taxable income for 

the current tax year and all subsequent 

years.

The corporation can choose to forgo 

the elections above by affirmatively 

electing to capitalize its start-up or 

organizational costs on its income tax 

return filed by the due date (including 

extensions) for the tax year in which the 

active trade or business begins.

Note. The election to either amortize or 

capitalize start-up costs is irrevocable and 

applies to all start-up costs that are related 

to the trade or business.

Report the deductible amount of 

start-up and organizational costs and any 

amortization on line 2g of Schedule E. For 

amortization that begins during the current 

-10- Instructions for Form 1120-IC-DISC (Rev. 12-2021)
tax year, complete and attach Form 4562, 

Depreciation and Amortization.

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 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 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 

CAUTION

!

deferred arrangement, or amounts 

contributed under a salary reduction SEP 

agreement or a SIMPLE IRA plan.

See the Instructions for Form 1125-E 

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 (for example, 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 the following.

• 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, 

earlier, 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 

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -11-
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 

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 Part 

I, line 15; 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 Part I, line 16; 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 figuring 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 Part II, line 1, the total of lines 1c and 

2k, column (e), of Schedule B.

If there were commission sales, leases, 

rentals, or services for the tax year, the 

total qualified export receipts to be 

entered on Part II, line 1, are figured as 

follows (section 993(f)):

Line 1, Export Receipts 

Worksheet

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 

Schedule J, Part II, line 1 ....

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 

2019 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 Part II, line 5, is 

$2 million (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 

-12- Instructions for Form 1120-IC-DISC (Rev. 12-2021)
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 Part II, 

line 7, and carried to Part I, line 5. 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 Schedule E, 

line 2c. Also include the amount on 

Schedule J, Part IV, line 1, 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, later). 

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.

Note. For purposes of item 2, 

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.

Note. For purposes of items 1 and 2, 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 Part V, line 3, is 

allocated to each shareholder on Part III, 

line 10, 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 Schedule K, Part III, 

line 10.

Schedule K (Form 

1120-IC-DISC)

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 

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 this line. 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 on line 1a the code number and 

percentage of total export gross receipts 

(defined under Line 2. Definitions, later) 

for the product or service that accounts for 

the largest portion of the IC-DISC's export 

gross receipts. The product codes are at 

the end 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% (0.45)) 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%” on line 1a.

Selling industrial chemicals accounts 

for $2 million (20% (0.20) of the $10 

million total) and is the IC-DISC's 

second-largest product or service. The 

IC-DISC should enter “281” (the product 

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -13-
code for industrial inorganic and organic 

chemicals) and “20%” on 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.

• Providing services involved in such a 

sale or rental.

• Providing export management services.

For commission sales, export gross 

receipts include the total receipts on which 

the IC-DISC earned the commission.

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 include the 

total of the amounts from 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

• An estate or trust (other than a foreign 

estate or trust as defined in section 

7701(a)(31)).

Export Gross Receipts

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.

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.

Schedule O

Other Information

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. Limitation on business interest expense. For tax years beginning 

after 2017, the limitation on business 

interest expense applies to every taxpayer 

with a trade or business, unless the 

taxpayer meets certain specified 

exceptions. A taxpayer may elect out of 

the limitation for certain businesses 

otherwise subject to the business interest 

expense limitation.

Certain real property trades or 

businesses and farming businesses 

qualify to make an election not to limit 

business interest expense. This is an 

irrevocable election. If you make this 

election, you are required to use the 

alternative depreciation system to 

depreciate any property with a recovery 

period of 10 years or more. Also, you are 

not entitled to the special depreciation 

allowance for that property. For a taxpayer 

with more than one qualifying business, 

the election is made with respect to each 

business.

Check “Yes” if the taxpayer has an 

election in effect to exclude a real property 

trade or business or a farming business 

from section 163(j). For more information, 

see section 163(j) and the Instructions for 

Form 8990.

Question 8. Form 8990. Generally, a 

taxpayer with a trade or business must file 

Form 8990 to claim a deduction for 

business interest. In addition, Form 8990 

must be filed by any taxpayer that owns an 

interest in a partnership with current year, 

or prior year carryover, excess business 

interest expense allocated from the 

partnership.

Exclusions from filing. A taxpayer is 

not required to file Form 8990 if the 

taxpayer is a small business taxpayer and 

does not have excess business interest 

expense from a partnership. A taxpayer is 

also not required to file Form 8990 if the 

taxpayer only has business interest 

expense from these excepted trades or 

businesses:

• An electing real property trade or 

business,

• An electing farming business, or

• Certain utility businesses.

Small business taxpayer. A small 

business taxpayer is not subject to the 

business interest expense limitation and is 

not required to file Form 8990. A small 

business taxpayer is a taxpayer that (a) is 

not a tax shelter (as defined in section 

448(d)(3)), and (b) meets the gross 

receipts test of section 448(c), discussed 

next.

Gross receipts test. A taxpayer 

meets the gross receipts test if the 

taxpayer has average annual gross 

receipts of $26 million or less for the 3 

prior tax years. A taxpayer's average 

annual gross receipts for the 3 prior tax 

years is determined by adding the gross 

receipts for the 3 prior tax years and 

dividing the total by 3. Gross receipts 

include the aggregate gross receipts from 

all persons treated as a single employer, 

such as a controlled group of 

corporations, commonly controlled 

partnerships, or proprietorships, and 

affiliated service groups. See section 

448(c) and the Instructions for Form 8990 

for additional information.

Question 9. 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 RIC.

Question 10. Foreign owner. If the 

answer to question 10(a) or 10(b) is "Yes," 

enter on line 10(b)a the percentage 

owned. On line 10(b)b, enter the owner's 

country, and on line 10(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 (Form 

1120-IC-DISC)

Intercompany Transfer Price or 

Commission

Complete and attach a separate 

Schedule P (Form 1120-IC-DISC) for each 

transaction or group of transactions to 

-14- Instructions for Form 1120-IC-DISC (Rev. 12-2021)
which you apply the intercompany pricing 

rules of section 994(a)(1) and (2).

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United 

States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to 

figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form 

displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents 

may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, 

as required by section 6103.

The time needed to complete and file Form 1120-IC-DISC, Schedule K (Form 1120-IC-DISC), and Schedule P (Form 

1120-IC-DISC), will vary depending on individual circumstances. The estimated burden for business taxpayers filing these forms is 

approved under OMB control number 1545-0123.

If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler, we would 

be happy to hear from you. You can send us comments through IRS.gov/FormComments. Or you can write to: Internal Revenue 

Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Don't send the tax forms to this 

address. Instead, see Where To File, earlier, near the beginning of these instructions.

Instructions for Form 1120-IC-DISC (Rev. 12-2021) -15-
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 Classication 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 specic industry group from which the largest percentage of

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.”

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 Household Appliances &

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

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

Merchandise Wholesalers,

Nondurable Goods 

424100 Paper & Paper Products

424210 Drugs & Druggists’ Sundries

424300 Apparel, Piece Goods, &

Notions

Information 

Publishing Industries (except

Internet)

511110 Newspaper Publishers 

511120 Periodical Publishers 

511130 Book Publishers 

511140 Directory & Mailing List

Publishers

511190 Other Publishers 

511210 Software Publishers

Motion Picture and Sound

Recording Industries 

512100 Motion Picture & Video

Industries (except video

rental)

512200 Sound Recording Industries

515100 Radio & Television

Broadcasting

515210 Cable & Other Subscription

Programming

517000 Telecommunications

(including paging, cellular,

satellite, cable & other

program distribution,

resellers, other

telecommunications, &

internet service providers)

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

Professional Services

Architectural, Engineering, and

Related Services 

541310 Architectural Services

541320 Landscape Architecture

Services

Broadcasting (except Internet)

Code

Code

Code

Schedule P (Form 1120-IC-DISC) Codes for Principal Business Activity

(These codes are used only with Schedule P (Form 1120-IC-DISC)). Using the list below, enter on each Schedule P, the code for the

specic industry group and the product or product line for which the

Schedule P is completed.

Transportation, Communication, Electric,

Gas, and Sanitary Services

Transportation

4400 Water transportation

4700 Other transportation services

Code

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

Nondurable

5110 Paper and paper products

5129 Drugs, drug proprietaries, and

druggists’ sundries

5130 Apparel, piece goods, and

notions

Retail Trade

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

Automotive dealers and service

stations

5515 Motor vehicle dealers

5541 Gasoline service stations

Finance, Insurance, and Real

Estate

Credit agencies other than banks

6199 Other credit agencies

Business services

7389 Export management services

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.

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

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

5490 Other food stores

Miscellaneous retail stores

5912 Drug stores and proprietary

stores

5921 Liquor stores

5995 Other miscellaneous retail stores

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

5598 Other automotive dealers

5600 Apparel and accessory stores

5700 Furniture and home furnishings

stores

5800 Eating and drinking places

Telecommunications

Data Processing Services

518210 Data Processing, Hosting, &

Related Services

532281 Formal Wear & Costume

Rental

532282 Video Tape & Disc Rental

532283 Home Health Equipment

Rental

532310 General Rental Centers

532400 Commercial & Industrial

Machinery & Equipment

Rental & Leasing

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, Scientic, & 

total gross receipts is derived. Total receipts means all income (line

1, page 1).

532284 Recreational Goods Rental

532289 All Other Consumer Goods

Electrical & Electronic Goods Rental

Technical Consulting Services

Code

Code Code

Code

-16-
Schedule N Product Code System

(These codes are used only with Schedule N, page 6, Form 1120-IC-DISC.)

Using the list below, enter on line 1 of Schedule N the product code number and percent of export gross receipts as explained in

the Specific Instructions.

This product code system is divided into two categories—nonmanufactured product groups and services, and manufactured

product groups.

Code

Nonmanufactured Product Groups and Services

Grains, including soybeans

Vegetables and melons

Fruit and tree nuts

Greenhouse, nursery, and oriculture

Cotton

Other crops (including sugar beets, peanuts,

spices, hops, and vegetable seeds)

Livestock

Poultry and eggs

Fishery products and services (including shellsh)

Fur bearing animals and unnished 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

Guns, howitzers, mortars, and related equipment

Ammunition (except small arms)

Sighting and re control equipment

Small arms

Small arms ammunition

Other ordnance and accessories

Food and kindred products

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

Cigarettes

Cigars

Tobacco (chewing and smoking) and snuff

Textile mill products

Broad woven cotton fabrics

Broad woven synthetic bers and silk fabrics

Broad woven wool fabrics

Narrow fabrics

Knit fabrics

Dyed and nished textiles

Carpets and rugs

Yarns and threads

Other textile goods

Apparel and other finished goods

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

Lumber and wood products (except furniture)

Logs and log products

Lumber construction materials (including

millwork, veneer, plywood and prefabricated

structural wood products)

Wooden containers

Other lumber and wood products

Furniture and fixtures

Household furniture

Ofce furniture

Public building and related furniture

Other furniture and xtures

Paper and allied products

Pulp

Newsprint

Business machine paper

Stationery and ofce 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

Newspapers

Periodicals

Books

Greeting cards

Manifold business forms

Other printed media

Chemicals and allied products

Industrial inorganic and organic chemicals

Plastics materials, synthetic resins, synthetic

rubber, and synthetic bers

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

Refined petroleum and related products

Rened petroleum

Paving and roong materials

Other petroleum and related products

Rubber and plastics products

Tires and inner tubes

Rubber footwear

Reclaimed rubber

Fabricated rubber products

Other rubber and plastics products

Leather and leather products

Tanned and nished leather

Industrial leather belting and packing

Boot and shoe cut stock and ndings

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

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

Primary and secondary nonfabricated metal products

Iron and steel products

Nonferrous metal products

Other primary and secondary nonfabricated metal

products

Fabricated metal products (except ordnance, 

machinery and transportation)

Metal cans

Cutlery, hand tools, and general hardware

Heating apparatus (except electric) and plumbing

xtures

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

Machinery (except electrical and electronic)

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

Electric power transmission and distribution

equipment (including transformers, motors and

generators)

Electrical ofce 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

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

Engineering, laboratory, and scientic 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

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

011

012

013

014

015

019

021

022

023

024

029

101

102

103

110

130

147

148

730

737

780

850

988

990

191

192

194

195

196

199

201

202

203

204

205

206

207

208

209

211

212

213

221

222

223

224

225

226

227

228

229

231

233

238

239

241

243

244

249

Code

251

252

253

259

261

262

263

264

265

266

269

271

272

273

274

275

279

281

282

283

284

285

286

287

289

291

295

299

301

302

303

306

309

311

312

313

314

315

316

317

319

321

322

323

324

325

326

327

328

329

331

332

339

Code

341

342

343

344

345

346

347

349

351

352

353

354

355

356

357

359

361

362

363

364

365

366

367

368

369

371

372

373

374

375

376

378

379

381

382

383

384

385

386

387

391

393

394

395

396

399

Ordnance and accessories

-17-