The “IC-DISC” is truly the last surviving export incentive for U.S. businesses. The acronym stands for the Interest Charge – Domestic International Sales Corporation. Unlike other export incentives that have been repealed due to economic sanctions by the World Trade Organization (WTO), the IC-DISC remains intact and is now more attractive than ever due to currently low dividend tax rates. The IC-DISC has been in existence since 1984 and has never been challenged by the WTO.

The IC-DISC provides U.S. exporters and their shareholders permanent tax savings. The basic operation of an IC-DISC can be demonstrated as follows:

  • A US exporter (or shareholder(s)) forms an IC-DISC corporation.
  • The US exporter pays a deductible commission (37% – the high individual income tax rate).
  • The IC-DISC pays no U.S. income tax on the commission income.
  • The commission income is accumulated and untaxed in the IC-DISC.
  • The commission income is taxed when the IC-DISC decides to pay a dividend to its shareholder(s)
    (23.8% – the preferred qualified dividend tax rate-of 20% plus 3.8% Net Investment Income Tax).
  • The permanent tax benefit is reduction of the tax rate of approximately 13.220%
  • For C-Corporation, the use of the IC-DISC generates a tax-deductible dividend of 21% (the highest C-Corp tax rate).



“Our company is a distributor and we do not manufacture any products. We don’t qualify.” INCORRECT – Tax benefits are also available to the distributors of U.S. made goods that are eventually consumed or used outside the U.S.
“We are a software company and export incentives do not apply to us” INCORRECT – Software that is downloaded from a server in the US by a Company outside the US or software licensed for reproduction outside the U.S. qualifies.
“We perform our engineering services overseas and often work on merely proposed projects. We don’t qualify.” INCORRECT – Engineering and architectural services performed inside or outside the U.S. qualify if they are in connection with an actual or proposed foreign production/construction project.
“We are a manufacturing company, but we do not export our products. Our customers/distributors are the ones who export. We don’t qualify.” INCORRECT – Manufacturers who sell to U.S. companies that ultimately export the products may qualify – e.g., manufacturer of chemical products that are ultimately exported by their customer/distributor.
“Our products are merely a component of a larger product made outside the U.S. and sometimes that product is imported back to the U.S. We don’t qualify.” INCORRECT – Products that are shipped outside of the U.S. that become a part of another product generally qualify even if the final product returns to the U.S.
“We don’t manufacture. We grow or extract our product. We don’t qualify.” INCORRECT – Goods grown or extracted in the U.S. and exported may qualify.

The majority of privately held U.S. companies are missing a significant income tax incentive because it’s believed they simply don’t qualify. We find that less than 10% of eligible companies that are involved with direct or indirect exports are taking advantage of the “IC-DISC” tax incentive program.