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Interest-Charge Domestic International Sales Corporation (IC-DISC)

A tax incentive structure for U.S. exporters that converts ordinary business income into qualified dividend income, creating a significant tax rate differential.

Structure Source: Billionaire Wealth Strategies Verified: 2026-04-07

Definition

An IC-DISC is a separate corporation formed specifically to receive commissions on export sales. The commissions are deductible by the operating company (reducing ordinary income) and taxable to the IC-DISC shareholders as qualified dividends (taxed at the lower capital gains rate). This creates a tax arbitrage of approximately 17 percentage points between the ordinary income rate (37%) and the qualified dividend rate (20%).

How It Works

The business forms a separate IC-DISC entity and pays it a commission of up to 4% of export gross receipts or 50% of export net income (whichever is greater). The operating company deducts the commission, reducing its taxable income at ordinary rates. The IC-DISC distributes the commission to its shareholders as qualified dividends, taxed at the preferential 20% rate.

The net effect: income that would have been taxed at 37% is instead taxed at 20%, a permanent tax savings on every dollar of export revenue flowing through the structure.

When Entrepreneurs Use This

Manufacturers with international sales: Even domestic production counts if the goods are ultimately exported
Software companies with international licenses: Software exported to foreign customers qualifies
Service businesses with deliverables sent abroad: Architecture, engineering, and design firms with international projects
Agricultural exporters: Farm products sold to foreign buyers

Dew Wealth Perspective

IC-DISC is one of the most underutilized tax incentives for entrepreneurs with any export component. Many business owners do not realize their revenue qualifies, especially when their product is sold to a U.S. distributor who then exports it. The Linchpin Partner identifies export revenue during the annual tax planning review and coordinates IC-DISC formation with the corporate attorney and tax advisor.

Frequently Asked Questions

Does my company need to export directly?

No. Products manufactured or produced in the U.S. that are ultimately exported qualify, even if sold through domestic intermediaries.

Is the IC-DISC structure expensive to maintain?

The IC-DISC requires a separate corporate entity and annual tax filing, but the administrative cost is minimal compared to the tax savings for businesses with meaningful export revenue.

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