IC-DISC

Freed Maxick helps companies all over the U.S. with the IC-DISC. Although EIE exclusion repeal creates a tax-savings void for some exporters, there is good news for small and mid-sized companies. Owner-managed exporting businesses can recoup — or even exceed — their tax savings by creating an interest charge-domestic international sales corporation (IC-DISC). The IC-DISC is not a tax shelter. Once a somewhat lackluster tax deferral vehicle, it was revamped last July by favorable dividend tax rules prescribed under the Jobs and Growth Tax Relief Reconciliation Act of 2003. In its new form, the IC-DISC provides a permanent 20 percent tax savings for qualifying U.S. exporters. It also has a number of sophisticated features that can be tailored to help businesses meet objectives and goals.

IC-DISC advantages and benefits:

Permanent tax savings on global sales
Permanent tax savings begins with the exporting company deducting the commission it pays to the IC-DISC from its ordinary income, which is taxed at 35 percent. Tax law sets the commission rate, which is based on export sales revenue, as the greater of either 50 percent of net income or 4 percent of gross income. Because the IC-DISC is tax exempt, tax is paid only on distributions to shareholders. Individual and pass-through company shareholders pay income tax on dividends at the capital gains rate of 15 percent.

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