IC-DISC icon

IC-DISC

Are you the owner of a profitable operating business that sells into foreign countries? If most of your production costs are in the U.S., you may have the opportunity for substantial tax savings through an IC-DISC. Forming an Interest Charge Domestic International Sales Corporation, or IC-DISC, is a highly effective tax incentive for companies that export from the U.S. This separate tax-free corporate entity acts as a selling agent for sales to foreign countries.

Benefits of implementing an IC-DISC include:

  • Sales commissions paid to the IC-DISC are tax-deductible to the operating business
  • Dividends paid to shareholders are taxed at a favorable dividend rate
  • Profits may be accumulated for estate planning
  • Income can be shifted to lower tax bracket taxpayers

Examples of qualifying companies include those who manufacture goods in the U.S. and export them to Canada. The opportunity also includes companies providing certain services, such as engineering and architectural, that are used in building structures in foreign countries, as well as companies manufacturing goods that are used in an exported product.

IC-DISC Requirements: Lumsden McCormick Can Help You Gain the Advantage

Like any other tax incentive, there are certain IC-DISC requirements that must be met and restrictions on the types of products that qualify. For example, a corporation must be incorporated in one of the 50 states or District of Columbia and file an election with the IRS to be treated as an IC-DISC for federal tax purposes. Further, the corporation must have a single class of stock and maintain a minimum capitalization of $2,500.

There are also a number of complex rules on how to compute the sales commission, but properly structured, our international tax experts can help you can maximize the income that is sheltered by the IC-DISC.

For more information about IC-DISC services from Lumsden McCormick, contact Mark Janulewicz or a service leader or complete the information below.

Services Leaders

Mark Janulewicz

Mark G. Janulewicz, CPA

Partner
Amanda Mooney

Amanda L. Mooney, CPA

Principal

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Webinar Series Part III: Planning, Planning, and More Planning - What’s Necessary to Optimize Your Personal Financial Position

Webinar Series Part III: Planning, Planning, and More Planning - What's Necessary to Optimize Your Personal Financial Position

June 22, 2021

Given the proposed tax rate increase to individuals, planning will be the key to mitigate financial stress. Your key takeaways from this one-hour discussion will include planning strategies that you can implement now.

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Webinar Series Part I: Federal Tax Laws Gone Wild

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