The Interest-Charge Domestic International Sales Corporation (IC-DISC) is a great incentive for U.S. companies with significant export activity. BeachFleischman CPAs is based in Arizona (Phoenix and Tucson) and works with business owners throughout the U.S. to claim IC-DISC benefits.
The American Jobs Creation Act of 2004 dealt a significant blow to U.S. exporters by phasing out the tax benefits available through the “extraterritorial income exclusion” (EIE). Fortunately however, there may be a way to offset the loss of the EIE. It is based on a tax device that’s been on the books since 1984 called the Interest Charge Domestic International Sales Corporation.
What is an IC-DISC?
It’s a corporation you set up to receive commissions on export sales, up to the greater of 50% of net income or 4% of gross receipts from qualified exports. Your business deducts the commission payments while distributions received from the IC-DISC are treated as qualified dividends, not capital gains.
Who is eligible?
If your business exports American-made goods or performs architectural or engineering services for foreign construction projects, you may be eligible.
How does it work?
Essentially, it allows you to convert ordinary income taxed at rates as high as 39.6% into dividends taxed at 15% or 20%. It also allows you to defer taxes on up to $10 million in commissions held by the IC-DISC by paying a modest interest charge to the IRS.
IC-DISC Advantage and Benefits
IC-DISC shareholdings can be used in a number of ways to help achieve business goals and objectives.
- Increased liquidity for principals or the business
- Permanent tax savings on global sales
- Ability to leverage cost of capital
- Opportunities to create management incentives
- Means to facilitate succession or estate planning
Contact our IC-DISC Team
BeachFleischman CPAs provides IC-DISC and other international tax services in Phoenix and Tucson, Arizona (AZ) and throughout the United States. If you are interested in learning more about how BeachFleischman’s tax professionals can assist you, please fill out the submission form below and you will receive a prompt response.