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For closely held entities, Urish Popeck tax consultants can assist with establishing a domestic corporation that elects to be treated as an Interest Charge Domestic International Sales Corporation (IC-DISC), and, as such, is not subject to federal income tax. If domiciled correctly, the entity will not be subject to state income tax as well.

Here is an example of how the tax benefit is realized in the IC-DISC structure. A US Manufacturing Company (USCO) calculates an annual "commission" payable to the IC-DISC for export-related services. USCO claims commission as an ordinary deduction (at 35% if USCO is a C Corporation). IC-DISC commission is not subject to income tax. The immediate benefit is derived by the distribution of the IC-DISC income to the shareholders as a dividend. Under current law, dividends are subject to a 15% rate at the individual shareholder level. USCO must have the IC-DISC in place at the time of the export sale in order to allocate a portion of the net income, in the form of a commission, to the IC-DISC.

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Related Service: Tax Consulting