Source: Max Koss CPA, Frost, PLLC, 10/10/11

Do you export?
The IC-DISC allows you to exclude up to 85% of your export profits from US taxation
What is an IC-DISC? The Interest Charge Domestic International Sales Corporation (IC-DISC) is a vehicle
that provides an opportunity for small-to-medium-size companies to have up to 85% of its export profits
excluded from US taxation. Profits are taxed at the current dividend rate of 15% as opposed to the
ordinary income rate of up to 35%. The significant savings afforded by the IC-DISC are meant to
increase the competitiveness of a US-based company with export sales and to help it compete in the
global market.
The basic operations of an IC-DISC:
• A US exporter (or its shareholders) forms an IC-DISC that acts as a commission agent for
the company’s export sales
• The US exporter pays a tax deductible commission to the IC-DISC
• The IC-DISC pays no US income tax on the commission income
• The IC-DISC pays a dividend to its shareholders who are taxed at the current preferred
qualified dividend tax rate of 15%
• This results in a 20 percentage point savings, 35% regular tax rate minus a 15% dividend
tax rate
Who qualifies? The IC-DISC is a powerful export incentive for small-to-medium-sized companies with
annual gross revenues of generally $1 million or more that export property that is manufactured or
produced in the US. Businesses include:
• manufacturers
• producers
• farmers
• wholesalers
• distributors
• architectural and engineering firms
• software developers
• other goods and or services
Transactions that qualify include direct sales to a foreign purchaser and sales to a US purchaser if the
goods are destined for use in a foreign country.

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