1. Seeing beyond the numbers... Increasing IC-DISC Revenue– Maximize the Export Tax Incentive Jonathan Lysenko May 20, 2009

2. Seeing beyond the numbers… The IC-DISC Tax Benefit Benefit: Qualified US exporters get a permanent 20% tax savings A US exporter sets-up a paper company ; a conduit for export sales US exporter pays a commission to the IC-DISC -- deduction at 35% IC-DISC pays a dividend to its shareholders – taxed at 15% Good Candidate: Exporter of US- manufactured products with > 50% US content Engineers and architects with construction projects outside the US US taxpayer should be profitable (i.e., tax-paying) in the US S-Corps, LLCs, and privately-held C-Corps 2

3. Seeing beyond the numbers… Safe Harbor Commission IC-DISC IRC Sec. 991 - 997 Overview: The safe harbor commission amount is treated as income to the IC-DISC and is tax deferred up to $10,000,000 of FTGR and taxed as a dividend when distributed to US parent or affiliate. The safe harbor commission is calculated at 50% of combined taxable income (CTI), 4% of foreign trading gross receipts (FTGR), or marginal costing whichever method yields the greatest benefit (IRC Sec. 994(a)) Client Impact: Entirely transparent no change to clients current business operations Business Impact: US Parent must set up paper company with separate books and bank accounts CTI Transfer amount up to 50% or 4% of FTGR 3

4. Seeing beyond the numbers… Increase the IC-DISC Benefit Maximize Export Gross Receipts: Related & Subsidiary Services Export Promotion Expenses Select Best Pricing Method: Transaction by Transaction Pricing Marginal Costing Add Functions & Risks: Buy / Sell IC-DISC Factoring Export Receivables Foreign International Sales Corporation 4

5. Seeing beyond the numbers… Maximize Export Gross Receipts Related & Subsidiary Services: FTGR includes R&S Services within the Controlled Group Subsidiary if less than 50% of the total of Sales and Service Income Including but not limited to - Warranty, Repair, Maintenance, Transportation Does not include Financing and Interest 5

6. Seeing beyond the numbers… Maximize Export Gross Receipts Export Promotion Expenses: Export Promotion Expenses paid by IC-DISC are reimbursed by US Exporter at cost plus 10% Export Promotion Expenses are expenses incurred by IC-DISC to advance export sales, including –Advertising –General and administrative expenses –Freight and shipping –Packaging, designing and labeling, etc. 6

7. Seeing beyond the numbers… Select Best Pricing Method T by T Approach: Commonly a 50% Increase in IC-DISC Benefit Determine Benefit Under Three Possible Methods: –4% Gross Receipts Method –50% Full Cost CTI Method –50% Marginal Costing CTI Method Good Candidate: Profit Variability (Product, Customers, Time of Yr., etc.) Available Sales & COGS by Transaction 7

8. Seeing beyond the numbers… Select Best Pricing Method Maximization Tips: 50% FC CTI if net profit is > 8% 4% Gross Receipts if net profit is < 8% Use Marginal Costing if Overall Profit Percentage is > FC CTI % and > 8% Transactional is the most beneficial overall method In addition – selective grouping is needed for maximization 8

9. Seeing beyond the numbers… Select Best Pricing Method Example 9

10. Seeing beyond the numbers… Buy/Sell IC-DISC IRC Sec. 994 Overview: Rather than a commission, the IC-DISC buys and sells qualified export inventory Essential to meet the 95% qualified export assets test Client Impact: Customer sees the IC-DISC as issuer of the invoice Business Impact : IC-DISC performs Back office invoicing Requires a Section 482 Transfer Pricing Study Average CTI transfer amount 66% - 70% 10

11. Seeing beyond the numbers… Export Invoice Factoring Rev. Rul. 75-430, Rev. Rul. 79-362 Overview: The IC-DISC adds a new source of revenue – factoring income Factoring income is derived from purchasing the invoices associated with commission income The invoices are discounted at a 4%-5% rate – the discount is additional IC-DISC income Client Impact: Customer sees the IC-DISC handling both invoicing and collections Business Impact: IC-DISC performs Back office invoicing IC-DISC takes on Account Receivable services (assumes credit risk) Requires a IRC Sec. 482 Transfer Pricing study Average CTI transfer amount – 70% to 75% 11

12. Seeing beyond the numbers… Foreign International Sales Corporation FISC IRC Sec. 993(e)(1) Overview: IC-DISC can own 100% of a Foreign International Sales Corporation (FISC) which has to be located in a jurisdiction outside of the 50 United States and Puerto Rico (i.e. U.S. Virgin Islands, or Bermuda) FISC buys the inventory from the US Exporter at a discount and than sells it to the foreign customers – the FISC earns a standard distributor return FISC pays a dividend of profits to the IC-DISC Client Impact: FISC is more visible to customers than the IC-DISC; customers deal directly with the FISC Business Impact: FISC performs back-office invoicing and collections FISC is a full-fledged foreign trading company with inventory, credit, and market risk Requires a more extensive IRC Sec. 482 Transfer Pricing Study Average CTI transfer amount – 75% to 85% 12

13. Seeing beyond the numbers… Thank You Jonathan Lysenko (212) 682-1600 ext 6359 lysenko@amper.com 13 The material contained in this presentation is for general information and should not be acted upon without prior professional consultation.