DISC Tax Planning 2007
Private Equity firms seize the moment to duplicate
IC-DISC Benefits!
The New York Times reported on July 13, 2007 that The Blackstone Group, the big buyout firm, had devised a way for its partners to effectively avoid paying taxes on $3.7 billion, of the $4.75 billion received in the initial public offering.
In essence, effectively means, paying a tax rate of 15% instead of 35% on the portion termed “Goodwill”. Since other private equity firms such as “The Fortress Investment Group”, “Kohlberg Kravis Roberts”, and “Och Ziff Capital Management”, have or will soon use similar tax strategies public
Offerings at the same time congress is debating whether most of the compensation earned by fund managers should be taxed at 35% or 15%, there is no question the final resolution will be politically significant.
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What is significant at this time to closely held Exporters, is whether there will be a philosophical carryover to IC-DISCs, which are the only entities actually structured to convert 35% profits into 15% dividends. All too often corrective legislation designed to correct an offense has a way of becoming offensive to intended beneficiaries of other provisions of the IRC.
| As with FSCs, the WTO took sharp notice of benefits to U.S. exporters only after entities such as Boeing and Microsoft bragged about their benefits. The result being smaller exporters were left without any benefits after the repeal, until IC-DISCs became valuable again because of the 2003 Tax Act. |
In the meantime, other than lack of awareness, there is virtually little or no reason for a profitable closely held Exporter, not to have formed an IC-DISC by this time.
Call your CPA, the DOC, the SBA, your Banker or your Doctor, but don’t miss out on the opportunity to convert, a minimum of 50% to a maximum of 100%, of your export profits, from a 35% tax rate to 15%. Please note: If you just want to talk with someone, please call me at 800-243-1372 there is no cost for the call.
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