IC-DISC

Methodology

An IC-DISC (Interest Charge – Domestic International Sales Corporation) enables the exporting company to decrease its taxable base at the corporate level by the commission amount paid to the IC-DISC. The following breaks down the five step process involved in creating and maintaining the IC-DISC:

Step 1

The exporting company creates a tax-exempt IC-DISC.

Step 2

The exporting company pays the IC-DISC a commission. The commission amount is determined as the greater of 50% of the net export income amount or 4% of gross export receipts.

Step 3

The commission amount paid to the IC-DISC is deducted from the exporting company’s ordinary income. If this amount remained with the exporting company, then it would be taxed at 35%.

Step 4

The IC-DISC pays the dividend to its shareholders. The shareholders pay a dividend income tax at the current rate of 15%.

Step 5

The net benefit is 20% tax savings on the IC-DISC commission.

Requirements

To qualify for this tax benefit, the U.S. exporter must have export property that meets the following requirements:

Manufactured, produced, grown or extracted in the United States;

Held for sale or lease for direct use or consumption outside the United States; and

Consists of a minimum of 50% United States content.

Benefits

Reduce taxable base for the exporter;

Increase cash flow for the exporter;

Decrease effective tax rate;

Elimination of double taxation for C-Corporations; and

IC-DISC pays no taxes.