Enacted by Congress in 1984, IC-DISC (Interest Charge-Domestic International Sales Corporation) provides permanent annual tax savings and other benefits for exporters of goods manufactured in the United States. These benefits include:
Recurring permanent tax savings for shareholders
Typically high benefits relative to costs
Deferral mechanism when earnings are not distributed out of IC-DISC
The ability to tax efficiently, which helps manages cash flow
Potential retirement planning flexibility
Analysis of allocation and apportionment methodologies
Multi-dimensional profitability analysis, useful in business review
Transactional taxable income calculation, reconciling tax-return data to financial information
Transparent paper trail
With an engagement team that works on or off site, WTP’s efficient implementation of IC-DISC does not impact customers or operations. It relies on data that is easily accessible, and it yields accurate, timely results for inclusion in a tax return.
The implementation of IC-DISC requires the following steps:
Exporting company shareholders create new entity, which elects IC-DISC treatment
Exporting company and IC-DISC entity execute a commission agreement
Exporting company pays IC-DISC a commission on export sales
Exporting company deducts the commission
Commission income of IC-DISC is not taxed
IC-DISC can pay a dividend in current or future tax year
IC-DISC dividend is typically a qualified dividend, taxed at 15%
