An IC-DISC is a separate entity that a company creates specifically for its exports. Through this entity a portion of the supplier’s export income is paid to the IC-DISC, which is then distributed back to its owner as a dividend payment. The ordinary income tax rate does not apply to this portion of export income and the capital gains rate is applicable instead. The percentage of tax savings depends on the supplier’s specific tax bracket, but can be significant.
Exporters who are good candidates for IC-DISC include, but are not limited to, the following:
- U.S. companies that directly export their products
- U.S. companies that sell products that are destined for use overseas
- Architectural and engineering firms who work on projects that will be constructed abroad (even though the work is performed in the United States)
- Pass-through entities and privately held corporations
The ever increasing global economy creates opportunities for US manufacturers through an IC-DISC. Talk to our tax team to learn if it makes sense for your business.