INTEREST CHARGE DOMESTIC INTERNATIONAL SALES CORPORATION (IC-DISC)

If your company exports goods, or you are considering entering the global market, you need to be aware of the advantages of establishing an IC-DISC (Interest Charge – Domestic International Sales Corporation). Your shareholders and owners can receive substantial tax savings through lower effective tax rates on your export profits by utilizing this often overlooked corporate structure.

Eligibility

IC-DISC is an export tax incentive for small and mid-sized U.S. businesses. A company that exports goods can use the IC-DISC designation to reduce the tax on up to 50% of their export income by owners and shareholders being taxed at the dividend rate rather than the ordinary income rate. This is achieved by creating a different corporate structure.

A business must be profitable and sell what the IRS terms as "export property to be eligible. According to the IRS § 993(c) defines export property as property:

  • That is manufactured, produced, grown, or extracted in the United States;
  • That is then held for sale, lease, or rental for direct use, consumption, or disposition outside the United States; and
  • The fair market value of which is not more than 50% attributable to articles imported into the United States. for IC-DISC and Foreign Tax Credits.