The Interest Charge-Domestic International Sales Corporation (IC-DISC) is the last surviving federal tax benefit for privately-held exporters in the United States. The IC-DISC was originally created by Congress to promote export sales by allowing companies to defer income, with interest charged on the deferred tax.
Exporters that don’t currently have an IC-DISC in place are missing the opportunity to significantly reduce their federal income tax burden each year. The IC-DISC provides U.S. exporters and their shareholders permanent tax savings— 19.6 percent of net export income.
Benefits you’ll love
Carrazco’s competitive strength resides in its people, methods, and tools. Our professional team is talented, credentialed and driven to succeed.
Recurring permanent tax savings for shareholders
Typically high benefits relative to costs
Deferral mechanism when earnings are not distributed out of IC-DISC
The ability to tax efficiently, which helps manage cash flow
Potential retirement planning flexibility
Analysis of allocation and apportionment methodologies
Multi-dimensional profitability analysis, useful in business review
How it works
The owner of the operating company forms a tax-exempt IC-DISC. The IC-DISC must maintain its own bank account, accounting records and file U.S. tax returns, but otherwise there are no changes to business operations.
- The operating company pays a tax deductible commission to the IC-DISC equal to at least 4% of operating company’s gross receipts from qualified exports or 50% of the operating company’s net income from qualified exports.
- The operating company expenses the commission and reduces ordinary income taxed at a maximum 39.6% rate.
- The IC-DISC is tax exempt and is not taxed on the commission income it receives from the operating company.
- The IC-DISC pays dividends to its shareholders, which are taxed at a 20% rate.
- The result yields a 19.6% permanent tax rate arbitrage (39.6% ordinary rate less 20% dividend rate).
Over 100 industry companies trust us
President - RB Spencer, Inc
Fletcher Insurance Services, Inc.