If your business exports American-made goods or performs architectural or engineering services for foreign construction projects, an interest-charge domestic international sales corporation (IC-DISC) can help slash your tax bill.
An IC-DISC is a ‘paper’ corporation you set up to receive commissions on export sales, up to the greater of 50 percent of net income or four percent of gross receipts from qualified exports. Your business deducts the commission payments, while distributions received from the IC-DISC are treated as qualified dividends, not capital gains.
Essentially, an IC-DISC allows you to convert ordinary income taxed at rates as high as 39.6 percent into dividends taxed at 15 percent or 20 percent. An IC-DISC also allows you to defer taxes on up to $10 million in commissions held by the IC-DISC by paying a modest interest charge to the IRS.
Think an IC-DISC might be right for you? Contact us for more information.