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.

Small business taxpayer.

A small business taxpayer is a taxpayer that (a) has average annual gross receipts of the annual threshold amount listed in section 3.31 of the Revenue Procedure for the tax year of the return being filed 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) and Inflation-adjusted Tax Items by Tax Year.

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 non-incidental, 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. 2024-30, 2024-30 I.R.B. 183, available at IRS.gov/IRB/2024-30_IRB#REV-PROC-2024-30, or its successor).

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:

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.

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.

Name and 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:

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.

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.

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.

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.

Line 8. Refundable Credit for Federal Tax Paid on Fuels.

Enter the credit from Form 4136.

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 non-incidental, 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 non-incidental 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, earlier.

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.

If you account for inventories in the same manner as non-incidental 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, earlier.

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.

Line 1. Inventory at Beginning of the 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.

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 the 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:

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 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.

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:

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.

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.

Line 1a.

Enter the IC-DISC's qualified export receipts from export property sold to foreign, unrelated buyers for delivery outside the United States. Do not include amounts entered on line 1b.

Line 1b.

Enter the IC-DISC's qualified export receipts from export property sold for delivery outside the United States to a related foreign entity for resale to a foreign, unrelated buyer, or an unrelated buyer when a related foreign entity acts as commission agent.

Line 2a.

Enter the gross amount received from leasing or subleasing export property to unrelated persons for use outside the United States.

Receipts from leasing export property may qualify in some years and not in others, depending on where the lessee uses the property. Enter only receipts that qualify during the tax year. (Use Schedule E to deduct expenses such as repairs, interest, taxes, and depreciation.)

Line 2b.

A service connected to a sale or lease is related to it if the service is usually furnished with that type of sale or lease in the trade or business where it took place. A service is subsidiary if it is less important than the sale or lease.

Line 2c.

Include receipts from engineering or architectural services on foreign construction projects abroad or proposed for location abroad. These services include feasibility studies, design and engineering, and general supervision of construction, but do not include services connected with mineral exploration.

Line 2d.

Include receipts for export management services provided to unrelated IC-DISCs.

Line 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.

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.

Line 1, Column (a).

Enter dividends (except those received on certain debt-financed stock acquired after July 18, 1984—see section 246A) that:

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:

Line 3, Column (a).

Enter the following.

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 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:

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:

Line 9, Column (c).

Generally, line 9, column (c), may not exceed the amount from line 29 of the Worksheet.for Schedule C, Lines 9 and 17. 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 10, Column (a).

Enter the foreign-source portion of dividends that:

Line 11, Column (a).

Enter foreign dividends not reportable on line 3, 6, 7, 8, or 10 of column (a).

Lines 12a, 12b, and 12c, Column (a).

Enter Subpart F inclusions derived from the sale by a CFC.

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 15, Column (a).

Include the following.

Line 17, Column (c).

Generally, line 17, column (c), cannot exceed the amount on line 30 of the Worksheet for Schedule C, Lines 9 and 27. See the worksheet, earlier. However, in a year in which an NOL occurs, the limitation in section 246(b)(1) does not apply. See sections 172(d) and 246(b).

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.

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 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.

Line 2b. Taxes and Licenses.

Enter taxes paid or accrued during the tax year, but do not include the following.

See section 164(d) for apportionment of taxes on real property between seller and purchaser.

Line 2c. Interest.

Do not deduct the following interest.

Special rules apply to the following.

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. 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.

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.

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.

Line 1. Product Code and Percentage.

Enter on line 1a the code number and percentage of total export gross receipts (defined under Line 2, Export gross receipts for the current tax year , 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.

Line 2. Export gross receipts for the current tax year.

Export gross receipts are receipts from any of the following.

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:

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:

Column (a). Export gross receipts of the IC-DISC.

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). Related IC-DISCs.

Complete column (b) to report related IC-DISCs' export gross receipts from all sources (including the United States).

Column (c). 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.

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, Limitation on Business Interest Expense Under Section 163(j), 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.

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.