IC-DISC Case studies

The IC-DISC allows U.S. companies to set up separate domestic entities, which act as commission agents for the company’s export sales. Three good reasons for setting up an IC-DISC are: 1) the commission is fully deductible; 2) the IC-DISC pays no federal income tax; and 3) the IC-DISC acts as a Subchapter C Corporation in that it distributes its income to its owners as a qualified dividend. The result is a permanent reduction in tax of twenty cents on every commission dollar (taking the difference between the top ordinary income rate and the qualified dividend rate).