The IC-DISC is the last surviving federal income tax incentive for U.S. companies that have products or services delivered outside of the United States. Originally enacted by Congress in 1971, the IC-DISC is the only statutory export inventive available today. Corporations, S-Corporations, individuals and partnerships are eligible to receive this tremendous federal income tax savings available under the Internal Revenue Code.
The passage of the Tax Cuts and Jobs Act of 2017 provides permanence for the IC-DISC. As such, the IC-DISC provides a permanent federal income tax reduction to the shareholders of the IC-DISC. This tax savings is realized when the exporting company deducts the commission it pays to the IC-DISC from its ordinary income. This commission would typically be deductible at 37%. IC-DISC is a non-taxable entity, and a 23.8% percent tax is paid on qualified dividends to the shareholders of the IC-DISC. Thus, a reduction in federal income taxes from 37% to 23.8% on qualified export sales is realized.
