Who Qualifies for the IC-DISC?

Qualifications

You should consider setting yourself up for this export tax incentive if you:

  • Have export sales of products or services over $2 million
  • Have a minimum net export sales of $500,000
  • Have significant tax liability on current or projected income

To qualify for an IC-DISC, you must be a U.S. exporter offering items that:

  • Are grown, produced, manufactured, or extracted in the United States by a person or entity that is not the IC-DISC
  • Are held primarily for sale, lease, or rental for direct use, consumption or disposition outside the United States
  • Contain a minimum of 50% U.S. content

Election

Election

There are three steps to obtaining export sales tax savings, starting with election. Here, the exporting company creates a new legal entity and elects federal non-taxable IC-DISC status.


IRS approval is required, and setting up this IC-DISC structure requires a deep knowledge of this specific area of the tax code – our Veritax team has you covered.

Commission

Commission

After the IC-DISC status is approved by the IRS, tax savings can be realized by paying a commission to IC-DISC. This commission can be deducted at 39.6%, which reduces the ordinary taxable income of the corporation.

Dividend

Dividend

The commissions paid to the IC-DISC are then distributed to the owners of the IC-DISC at qualified dividend rates (23.8%), resulting in tax savings of 39.6%-23.8% or 15.8%.

Scenarios

Scenarios

While calculating the amount of commission to pay on export sales requires extensive experience, we have a few tax savings scenarios to illustrate the possible savings:

  • $250,000 IC-DISC commission → $39,500 tax savings
  • $2 million IC-DISC commission → $316,000 tax savings
  • $5 million IC-DISC commission → $790,000 tax savings

Ready to explore your tax savings? Book a free consultation with a Veritax IC-DISC tax expert today.