How to Benefit From the IC-DISC Export Tax Incentive

A separate legal entity recognized by the IRS, the IC-DISC takes advantage of specific tax incentives for U.S.-based exporters. Originally enacted by Congress in 1971, it’s the last surviving incentive for U.S. companies with products or services delivered outside the United States. Get in on this export tax incentive by connecting with us today.

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Who Qualifies for the IC-DISC?

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

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

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

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

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.

IC-DISC FAQs

Does my tax preparer already do this?
Unless you are using one of the Big Four accounting firms, your tax preparer typically will not have the expertise in-house to handle the complex issues surrounding the establishment of an IC-DISC structure and the continued commission calculations required. Your tax preparer will generally look to an outside provider, such as Veritax, for the expertise to assist the client in need of IC-DISC services.
Is the IC-DISC structure a permanent tax benefit?

The passage of the American Taxpayer Relief Act of 2012 made the IC-DISC structure a permanent part of the tax code going forward. This knowledge allows the owners of the exporting company to set up the IC-DISC structure without the fear of the incentive going away in the future.

How much does it cost, and how much will it save?

In all of our projects, we prepare an initial no-cost analysis to determine the benefits of setting up an IC-DISC. From this analysis, we determine the cost of the IC-DISC, and then you can make a final decision on whether it would be beneficial to you and your business.


The fees are 100 percent deductible, and from our experience, the benefit will significantly outweigh the costs of setting up and administering the IC-DISC.

How do I get started?
Contact Empowered Tax Strategies today at tax@empoweredtaxstrategies.com or call (888) 939-3309 to request your no-cost estimate or to book a free consultation.
What if I need more information?

If you have any questions about TPRs, consult with a tax professional.

Other Tax Credits & Deductions

Real estate investors can increase depreciation deductions, reduce income tax liabilities, and maximize cash flow.

Companies can get a tax credit for developing lighter, faster, more durable, less expensive, more reliable, or more precise products.

Property owners can expense some of their building-related expenditures, such as supplies or repairs, to reduce taxable income.

Building owners, architects, an engineers that build green can save money with the 179D tax deduction.

Let's Chat

Let's get started by booking a meeting for a free consultation. We will go through different specialty tax programs that will help you save!

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