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IC-DISC: Mastering Intricacies of the Federal Tax Incentive for Exporters

Overcoming Compliance Challenges to Maximize Tax Benefitspresents

Today's panel features:Robert J. Misey, Shareholder, Reinhart Boerner Van Deuren, Milwaukee

Neal Block, Partner, Baker & McKenzie, ChicagoJerry Ogle, President, Ogle International Tax Advisors, Bradenton, Fla.

Wednesday, July 15, 2009

The conference begins at:1 pm Eastern12 pm Central

11 am Mountain10 am Pacific

The audio portion of this conference will be accessible by telephone only. Please refer to the dial in instructions emailed to registrants to access the audio portion of the conference.

A Live 90-Minute Webinar/Audio Conference with Interactive Q&A

IC-DISC: The Federal Tax Incentive For Exporters

WebinarJuly 15, 2009

Maximizing Tax Savings For Exporters With An IC-DISC

Robert J. Misey, Jr.Reinhart Boerner Van Deuren s.c.

[email protected]

\2796051

2

Requirements For An IC-DISC

• An IC-DISC must be a U.S. corporation with a single class of stock

• The IC-DISC stock must have a minimum par value of $2,500

• The U.S. corporation elects to be an IC-DISC by filing a Form 4876-A– For an existing corporation to elect IC-DISC status, the

Form 4876-A must be filed during the 90 days preceding the first day of the corporation’s taxable year

– For a newly-formed corporation, the Form 4876-A must be filed within 90 days after the beginning of the corporation’s first taxable year

3

Taxation Of An IC-DISC And Its Shareholders

• An IC-DISC is not subject to the regular U.S. corporate income tax. As a result, the IC-DISC does not pay tax on the commission received from the manufacturing entity– When the IC-DISC pays a dividend to its owners, the owners will

pay tax at a 15% rate. In effect, the owners are converting a 35% tax on income, representing the amount of the commission for a 15% individual tax

– If the manufacturing entity is a flow-through entity, such as an S corporation, partnership or most limited liability companies (“LLCs”), the reduction in tax is 20 percentage points

– If the manufacturing entity is a C corporation, the reduction in tax is 29.75 percentage points

4

US

IC-DISCManufacturing Exporter

U.S.

Foreign

Exports

commission

dividend

US

IC-DISCManufacturing Exporter

U.S.

Foreign

Exports

commission

dividend

5

The Tests To Qualify As An IC-DISC

• To qualify as an IC-DISC, the domestic corporation must pass both the qualified export receipts and qualified export assets tests

• The qualified export receipts test states that 95% of the gross receipts of the IC-DISC must constitute qualified export receipts – Qualified export receipts include gross receipts from sales of

export property, rents for the use of export property outside the U.S., services related to export sales, engineering or architectural services for construction projects, and commissions thereon

6

Example 1: Uncle Sam wholly-owns USAco, an S corporation that manufactures widgets. Due to burgeoning export sales, Uncle Sam forms an IC-DISC whose only activity results in receiving commissions on qualified export receipts. Because 100% of the IC-DISC’s gross receipts constitute qualified export receipts the IC-DISC satisfies the gross receipts test

US

IC-DISCUSAco

U.S.

Foreign

Exports

commission

dividend

US

IC-DISCUSAco

U.S.

Foreign

Exports

commission

dividend

7

Example 2: Uncle Sam, who wholly-owns USAco, an S corporation that manufactures and exports widgets, also sells maintenance service contracts for widgets to those same foreign customers. The gross receipts from those maintenance service contracts constitute qualified export receipts

US

IC-DISCUSAco

U.S.

Foreign

Services

commission

dividend

US

IC-DISCUSAco

U.S.

Foreign

Services

commission

dividend

8

Example 3: Uncle Sam wholly-owns USAco, an S corporation that is an architectural firm. USAco's specialty is designing drive-in wedding chapels that are built in Europe. The receipts from the designs constitute qualified export receipts

US

IC-DISCUSAco

U.S.

Foreign

Architectural Designs

commission

dividend

US

IC-DISCUSAco

U.S.

Foreign

Architectural Designs

commission

dividend

9

• The qualified export assets test states that 95% of the assets of the corporation must be qualified export assets– Qualified export assets include accounts

receivable, temporary investments, export property and loans to producers

10

Example 4: Uncle Sam wholly-owns USAco, an S corporation that manufactures widgets. Uncle Sam capitalizes an IC-DISC with $2,500 of cash, and the IC-DISC receives a commission during the year of $10,000 that is put in a checking account before being distributed on the last day of the year as a dividend. Because the $2,500 cash remaining constitutes working capital to meet the needs of potential creditors, the $2,500 is a temporary investment, and 100% of the IC-DISC’s assets constitute qualified export assets. Consequently, the IC-DISC passes the qualified export assets test

11

US

IC-DISCUSAco

U.S.

Foreign

Exports

$10,000 commission$2,500 par value

$10,000 dividend

US

IC-DISCUSAco

U.S.

Foreign

Exports

$10,000 commission$2,500 par value

$10,000 dividend

Example 4 (Cont.)

12

Example 5: Uncle Sam wholly-owns USAco, an S corporation that manufactures widgets. Due to burgeoning export sales, Uncle Sam forms an IC-DISC, which acts as a buy-sell IC-DISC (buying widgets from USAco and selling them to foreign customers). Assuming that the widgets constitute export property, any widgets remaining in inventory at year-end constitute qualified export assets, and 100% of the IC-DISC’s assets constitute qualified export assets. Consequently, the IC-DISC passes the qualified export assets test

13

US

IC-DISCUSAco

U.S.

Foreign

Exports

widgets

dividend

US

IC-DISCUSAco

U.S.

Foreign

Exports

widgets

dividend

Example 5 (Cont.)

14

Example 6: Uncle Sam forms an IC-DISC that receives commissions on qualified export receipts. The IC-DISC, rather than distribute a dividend to Uncle Sam, takes the cash representing the commissions and loans the cash back to USAco. Because loans to producers, such as to the widget-manufacturing USAco, constitute qualified export assets, 100% of the IC-DISC's assets constitute qualified export assets. Consequently, the IC-DISC passes the qualified export assets test

15

Example 6 (Cont.)

US

IC-DISCUSAco

U.S.

Foreign

Exports

loan

dividend

commission

US

IC-DISCUSAco

U.S.

Foreign

Exports

loan

dividend

commission

16

Qualification As Export Property

• There are three requirements for an IC-DISC to receive income from a sale of export property:– The property must be manufactured, produced, grown

or extracted in the U.S. by a party other than the IC-DISC

– The export property must be held primarily for sale, lease or rental for direct use, consumption or disposition outside the U.S.; and

– The export property must have a maximum of 50% foreign content

17

The Manufacturing Requirement

• Property is manufactured within the U.S. if either (a) conversion costs incurred in the U.S. constitute 20% of the cost of goods sold, (b) there is a substantial transformation in the U.S., or (c) the operations in the U.S. are generally considered to constitute manufacturing

18

Example 7: USAco sells lime-green leisure suits with wide white belts, an immensely popular product with those who patronize discos. In order to make these hideous-looking suits attractive to consumers, USAco packages them in gold-plated cardboard and plastic boxes and exports them for $100 a suit. USAco pays contract manufacturers in China $30 for each suit, but the gold-plated packaging adds $10 to the cost of goods sold. Because the$10 cost in the U.S. constitutes at least 20% (25%) of the total cost of goods sold of $40 ($30 + $10), USAco has conducted manufacturing

19

leisu

re su

its$3

0

IC-DISCUSAcocommission

US

Exports

gold-plated packaging

$10

Foreign

U.S.

packaged suits$100

dividend

leisu

re su

its$3

0


US

Exports

gold-plated packaging

$10

Foreign

U.S.

packaged suits$100

dividend

Example 7 (Cont.)

20

Example 8: USAco operates a metal processing shop. USAcopurchases steel rods and converts them to screws and nails. The conversion is a substantial transformation and, therefore, USAcohas manufactured the screws and nails

Exports


US

steel rods

Foreign

U.S.

Screws and nails

dividend

Exports


US

steel rods

Foreign

U.S.

Screws and nails

dividend

21

Example 9: USAco separately purchases the frames, wings, tinted lenses and little screws that can be combined to make sunglasses. USAco pays minimum wages to 11th grade dropouts who put together approximately 20 sunglasses each hour. Assuming that these conversion costs are less than 20% of the costs of goods sold, and there is a not a substantial transformation of the sunglass components in the sunglasses, manufacturing is satisfied only ifthis process is generally considered to constitute manufacturing

22


US

sunglass components

Foreign

U.S.

sunglasses

Exports

dividend


US

sunglass components

Foreign

U.S.

sunglasses

Exports

dividend

Example 9 (Cont.)

23

The Destination Requirement

• The export property must satisfy a destination test, which requires being held for sale, lease or rental in the ordinary course of business for direct use, disposition or consumption outside the U.S.– Property satisfies the destination test if it is delivered to

a freight forwarder for ultimate shipment abroad– Property also satisfies the destination test if it is sold to

a customer in the U.S., provided the property does not undergo further manufacturing by the purchaser prior to export, and the property is shipped to a foreign destination within one year

24

Example 10: USAco sells widgets to a widget distributor in Buffalo, N.Y. One of the Buffalo distributor’s biggest customers is a Toronto-based company. If properly documented, the widgets re-sold by Buffalo distributor to a Toronto-based company satisfy the destination test

Toronto Customer


US

Foreign

U.S.

Buffalo distributor

dividend

Toronto Customer


US

Foreign

U.S.

Buffalo distributor

dividend

25

Example 11: USAco sells widgets to a customer in Vancouver, B.C. After receiving the widgets in Canada, the Vancouver customer sends the widgets to its manufacturing plant in Seattle. Because the product has come back to the U.S. within 12 months, USAco has failed the destination test

Vancouver customer

IC-DISCExportercommission

US

Foreign

U.S.

Seattle plant

dividend

Vancouver customer

IC-DISCExportercommission

US

Foreign

U.S.

Seattle plant

dividend

26

Example 12: FAMILYco, a closely-held LLC, manufactures windshield wipers in the U.S. with U.S. materials. FAMILYco, through its IC-DISC, sells its windshield wipers to Big3co, a Detroit auto manufacturer, which affixes the windshield wipers to its new automobiles that are exported to Canada. The IC-DISC can benefit from the sale of its windshield wipers to Big3co only if affixing windshield wipers to automobiles is not further manufacturing

27

Foreign

U.S.

IC-DISC

Big3co

windshield wiperspayment

exports cars

commission

FAMILYco

H W

Foreign

U.S.

IC-DISC

Big3co

windshield wiperspayment

exports cars

commission

FAMILYco

H W

Example 12 (Cont.)

28

The Maximum 50% Foreign Content Requirement

• No more than 50% of the fair market value of export property may be attributable to the fair market value of articles imported into the U.S. The fair market value of the foreign content is determined by the dutiable value of any foreign components

29

Example 13: Willie, a U.S. citizen, wholly-owns PAPco, a manufacturer of paper products that is a C corporation. Due to burgeoning export sales, Willie forms an IC-DISC whose exporter receives $200 per paper product. The materials to manufacture the paper products are wood pulp, which is purchased from companies situated in the U.S., and kryptonite, which is purchased from a kryptonite mine in Mexico. The dutiable value of the kryptonite is $80 per paper product. Because the majority of the content constitutes materials purchased in the U.S., the paper products satisfy the content requirement. However, should the cost of kryptonite ever rise to the extent that it exceeds 50% of the value of the paper products, the paper products would have too much foreign content and would not qualify as export property

30

krypto

nite

IC-DISCPAPcocommission

Paper products exports$200

wood pulp

Foreign

U.S.

$80

WUS

dividend

krypto

nite

IC-DISCPAPcocommission

Paper products exports$200

wood pulp

Foreign

U.S.

$80

WUS

WUS

dividend

Example 13 (Cont.)

31

Implementation Considerations For The IC-DISC

• Execution is critical to ensure that the IC-DISC and the export sales qualify for this benefit– Incorporate the IC-DISC before the export sales begin and make a $2,500

capital contribution– Analyze export assets and gross export receipts, which can include sales to

distributors – Analyze the manufacturing, destination and content requirements for export

property– Draft the commission agreement between the IC-DISC and the exporter– Prepare and file the Form 4876-A that elects IC-DISC status for the

corporation– Prepare a manual that contains guidelines for the client’s operating

procedures that includes a checklist/calendar to determine when the client should complete various activities, such as when the client should determine that the IC-DISC has satisfied the gross receipts test and the export assets test.

Your Trusted Tax Counsel

Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.

IC-DISC: The Federal Tax Incentive For Exporters

WebinarJuly 15, 2009

IC-DISC Ownership Structures

Neal J. BlockBaker & McKenzie LLP (Chicago)[email protected]

©2009 Baker & McKenzie LLP

The Interest Charge Domestic International Sales Corporation

Overview Of Presentation

2

• Privately-held company: C, S, LLC, partnership

• Publicly-traded corporation

• Individual Retirement Account (IRA) and Roth IRA

• Estate planning, executive compensation

• Treaty benefits

• Sourcing benefits



C Corporation• Dividends subject to corporate tax at approximately 35%

• Recommended that IC-DISC be owned directly by the shareholders of the C corporation so they can avoid double taxation and possiblyreceive dividends at 15% rate.

Privately-Held Company

,,

3

U.S. – C Corp Exporter

(Related Supplier)

IC-DISC Commission

35%

IC-DISC

Individual Shareholders

IC-DISC Dividend 15%




4

S Corporation and LLC• Dividends pass through the corporation to the shareholders and are

deferred from taxes and possibly taxed at the 15% rate

IC-DISC Commission 35%

IC-DISC

U.S. Exporter(S Corp.)

Capital Gains Dividend – 15%

Individual Shareholders



Partnership Owned by S Corporation• Dividends pass through the partnership to the partners and

shareholders of the S corporations and possibly taxed at the 15%rate.

IC-DISC

15% Div.

Partnershipsand/or S Corps


5

Individuals

35% Commission Deduction

Deemed Exporter

Exporting Partnership

Deemed Exporter

C Corp ETI

Public Shareholders



Publicly-Traded Corporation - Deferral

6

IC-DISC Receivables & Commission

IC-DISC

Up to $10 Million Deferred

C CORP

Up To $10 Million Deduction



Publicly-Traded Corporation

7

• IC-DISC may defer from taxation 16/17 of best $10 million of gross receipts. The balance is deemed distributed to its shareholders

• Large exporters that generate substantial export receivables can sell the receivables to the IC-DISC at a discount. The discount income qualifies as qualified export receipts




8

• Deferred income becomes a low-cost, pre-tax source of funds for export working capital and financing international sales

• As much as $10 million may be generated from discount income and 16/17 deferred from tax, i.e., $1 of discount income = $1 of gross receipts



Example I

Assume:

An IC-DISC owned by a “C” Corp. in 2004 receives commissions for export sales and earns discount income from factoring export receivables of $8 million. It earns a 20% or $.4 million commission on the best $2 million of sales. The IC-DISC is tax exempt and is allowed to retain income attributable to the best $10 million of gross receipts. The balance of gross receipts over $10 million is deemed distributed to the IC-DISC’s shareholders as a dividend. Use of the IC-DISC results in a $2.77 million tax savings as follows:


9



Example I (cont.)

Discount income $ 8.00 millionCommission on best $2 million of sales .40 million

Total IC-DISC income before deemed distribution $ 8.40 million

Less 1/17 deemed distribution .50 million

Total income to be retained $ 7.90 million

Tax Savings @ 35% $ 2.77 million


10



Example I (cont.)

Interest charge imposed on IC-DISC shareholder on tax savings (based upon One Year Treasury Bill rate)

Assume tax savings in 2007 $ 2.77 millionInterest rate on One Year Treasury Bill

in Sept. 2008 4%

Interest charge payable when IC-DISCshareholder’s 2008 return due (2009) $ 110,800 Tax

benefit from interest deduction -$55,400 @ 35% 38,780

Net cost of interest charge $ 72,020


11



Example II

MAXIMUM BENEFIT FROM DISCOUNT INCOME

Assume:

$10 million of discount income $10.00 millionLess 1/17 deemed distribution .85 million

Net $ 9.15 million


12



Example II (cont.)

Tax benefit $10 million @ 35% $ 3.20 million

Interest Charge:

$3.2 million saved at 4% $ 128,000

Tax benefit from interest deduction – $128,000 @ 35% 44,800

Net cost of interest charge $ 83,200


13



BeneficiaryRoth IRA – 0 Tax

Regular IRA – Regular Tax

IRA

C CORPC CorporateTax Rates on

IC-DISC Dividends

IC-DISC

Corporate Tax Rateson IC-DISC Dividends

0 Taxon C Dividends

14



IRA IC-DISC BenefitsUse Of C Corp To Own IC-DISC Stock

15

• Allows dividends from IC-DISC to be taxed to C corporation at corporate rates of 15% - 35%

• Dividends from C corporation to IRA tax-free

• Assets invested by IRA tax-free

• Distributions taxed when distributed by regular IRA distributions tax free when distributed by Roth IRA

• May be combined with IRS direct ownership of IC-DISC stock



IRA IC-DISC BenefitsIRA Ownership Of IC-DISC

16

• Accumulated IC-DISC income taxed at corporate rates 15-35% when distributed

• Assets in IRA invested tax-free

• Multiple IRA structure could reduce total tax on IC-DISC dividends

• Use of LLC owned by IRA to avoid custodian involvement

• Roth IRA distributions not taxed to beneficiaries



Estate Planning And Executive Compensation

17

• Estate planning: Ownership of IC-DISC stock in different proportions than exporting company stock can remove IC-DISC dividends from estate. Rev. Rul. 81-54 may result in gift tax exposure

• Executive compensation and succession: IC-DISC dividends can be paid to designated employees who own IC-DISC stock but do not have to be the same shareholders of the parent company. May avoid safe harbor pricing requirements. Can be used as a parent stock purchase plan



Foreign International Sales Corporation(FISC)

18

• FISC: Owned more than 50% by IC-DISC

• FISC Dividends: Qualified IC-DISC export receipts [count towards best $10 million of gross receipts]

• Generally same activities qualify as IC-DISC regarding export property and related and subsidiary services

• 95% qualified export assets and gross receipts tests

• No safe harbor pricing

• Recommend when qualifying activities subject to low tax and otherwise would be subpart F income

IC-DISC

FISC



Treaty Country Corporation Structure

19A

Treaty Country Corp.

DISC Related Supplier

Div. @ Treaty

W/H Rate(5% or less)

Commission35% deduction



Treaty Benefits(Ownership Of A DISC By A Treaty Country Corporation)

19B

• Section 996(g) classifies IC-DISC dividends as effectively connected with the conduct of a trade or business in the U.S. through a permanent establishment. This would likely result in foreign corp. shareholder of a DISC being subject to tax on DISC dividends at up to 35% tax

• Section 996(g) is in conflict with most treaties which prevent taxation of a treaty country corporation in the absence of an actual permanent establishment, i.e., the mere existence of a U.S. subsidiary is not sufficient for U.S. taxation of dividends to parent as effectively connected income through a permanent establishment



Treaty Benefits(Ownership Of A DISC By A Treaty Country Corporation)

(Cont.)

19C

• Under the later-in-time theory, treaties executed after June 1984, therefore, may prevent 996(g) from applying

• IC-DISC dividends may thus be subject to 0 tax or taxed at treaty rate on dividends

• If foreign owner of DISC is an individual, the 15% tax rate on DISC dividends should apply even if no treaty benefit



Sourcing Benefits

20

• Section 861(a)(1)(D) treats IC-DISC dividends attributable to qualified export receipts as foreign source income to U.S. shareholders

• IC-DISC dividends are presently in a separate basket (Section 904(d))

• Opportunity exists to put foreign taxes into IC-DISC to create foreign source income:

(a) From U.S. title passage

(b) From FISCs



THANK YOU

Neal J. BlockBaker & McKenzie LLPOne Prudential Plaza

130 East Randolph DriveChicago, Illinois 60601 (312) 861-2937 (312) 698-2068

[email protected]

Baker & McKenzie LLP is a member of Baker & McKenzie International, a Swiss Verein

North American Tax Practice GroupYour Trusted Tax Counsel

Miami OfficeWaterford Business ParkMiami, Florida 33126(T) 305.671.3179 (F) 305.402.0552

Corporate Office8130 Lakewood Main St, Suite 208Bradenton, Florida 34202(T) 941.361.1147 (F) 941.827.9929

For more information on our servicesPlease contact us at our offices or visit us at our websitewww.ogleintltax.com

IC-DISC: The Federal Tax Incentive For Exporters Webinar

July 15, 2009

Pricing Rules And Annual Compliance

Jerry E . Ogle, CPA, [email protected] 15, 2009

Ogle International Tax Advisors offers IC DISC consulting services.In addition, our spectrum of international tax services can provide assistance in the areas of :

Foreign business investments -structure active business investments in offshore subsidiaries to minimize U.S. and host country taxation. Analysis of the U.S. CFC and PFIC rules for individual investors.

Offshore profits importing -plan for the repatriation of active foreign profits.

Foreign tax systems -analyze host country deductions, exemptions, and incentives, including foreign tax credits with host country tax advisors.




An IC-DISC can act as a buy-sell entity or as a commission-based entity

In any event, the transfer price between the IC-DISC and related supplier must be calculated under one of the three following methods:

4% gross receipts

50% combined taxable income (CTI)

Section 482

2




Under both the 4% gross receipts and 50% CTI methods, the DISC does not need to perform any economic functions or have any employees

Under both the 4% gross receipts and 50% CTI methods, the DISC can increase its commission by 10% of its export promotion expenses (EPEs) if the DISC is a buy-sell DISC versus a commission DISC [Reg. 1.994-1(a)(2) and Computervision Corp v. Commissioner (96 T.C. 652)]

EPEs include general administrative and selling expenses, certain freight paid to U.S.-flagged carriers, packaging costs, and design and label costs for export products incurred by the DISC

(Note: EPEs paid by a related party can qualify if a contract existed between the related parties, earmarking the EPEs for the buy-sell DISC before the transaction took place)

3




The pricing method chosen is required on a transaction by transaction (TxT) basis; however, an annual election can be made to group transactions in accordance with products or product lines

Neither the gross receipts method nor the CTI method may be applied in a way that causes, in any taxable year, a loss to the related supplier. There is a special rule that allows the 4% gross receipts method to apply when the overall profit percentage is not exceeded [Reg. 1.994-1(e)(1)(ii)]

4




When utilizing the CTI method, overhead costs generally are allocated between export and domestic sales based on detailed rules (Reg. 1.861-8)

However, if the profit margin on export products is less than the profit margin on worldwide sales of the same products, then marginal costing rules may be applied to allocate only marginal or variable costs against export receipts under the CTI method (Reg. 1.994-2)

Overall, the CTI method generally produces a larger benefit than does the gross receipts method, when exports have a greater-than-8% profit ratio

5




Related supplier income statement before IC-DISC commission

Domestic sales 300Export sales 100Domestic COGS (150)Export COGS (50)

GP 200

Overhead (100)

Taxable income 100 25%

6




DISC commission calculationMethod 4% CTIExport 100 100COGS (50)

GP 50

Overhead (25)

Net income 25

Total commission 4 12.50

7




Initial IC-DISC election is made on Form 4876-A within 90 days of the start of the taxable year (must be signed by all shareholders)

A Form 1120 IC-DISC is required to be filed annually on or before the 15th day of the ninth month following the close of the taxable year

Attached will be Schedule K, shareholder’s statement of IC-DISC distributions (indicates actual and deemed distributions that are taxable)

8




A Form 8404 must be filed by all IC-DISC shareholders on or before the original due date of their tax returns (no extensions are permitted)

Form 8404 requires that any deferred interest related costs must be paid (estimated tax payments are not required on a quarterly basis)

Deferred interest is calculated on hypothetical tax based on ordinary rates vs. qualified dividend rates

Form 8404 anticipates that estimates are likely needed and amended procedures are outlined in form instructions

Various states have different state income tax filings required

9




The DISC must make an initial estimate of the commission at the end of the year, and the related supplier must pay the commission within 60 days of the close of the year [Reg. 1.994-1(e)(3)(i)]

Reasonable estimate requires at least 50%Payment should generally be in cash to avoid non-compliance risk [TSI, Inc. v. U.S. (977 F.2d 424) and Thomas Int’l Ltd. v U.S. (773 F.2d 300)]True-up commission requires payment in 90 days

Some taxpayers have the related supplier pay the DISC commissions throughout the year, and the DISC makes corresponding distributions to DISC shareholders before detailed estimates are calculated

Caution should be used to not overestimate the commission and distributions

Failure to optimize available methods such as TxT, marginal costing, overhead allocation under CTI, EPE, and factoring of qualified export related accounts receivable (Rev. Rul. 75-430)

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