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IC-DISC
Interest Charge Domestic International Sales Corporation (IC-DISC) can lead to federal tax savings for U.S. exporters.

IC-DISC

U.S. exporters are using a corporate structure provided by Congress that can reduce their federal taxes. According to the Export-Import Bank of the United States, the Interest Charge Domestic International Sales Corporation (IC-DISC) has the potential to provide federal income tax advantages for certain U.S. businesses engaged in exporting goods and services abroad. The use of the IC-DISC can generate tax savings by converting some of a business’s export income into qualified dividends through a tax-deductible commission to the IC-DISC.

This effectively lowers the taxable income of the export business. Because an IC-DISC is tax-exempt, the commissions it receives are exempt from federal income tax. These commissions become taxable when the IC-DISC distributes qualified dividends to its owners. The shareholders of the IC-DISC are then liable for taxes on these qualified dividends, typically up to a maximum of 23.8%, comprising a 20% capital gains tax rate plus a 3.8% net investment income tax rate.

Certain manufacturers, service providers, distributors, software developers and architecture and engineering firms may be able to benefit from an IC-DISC. IC-DISCs can be set up regardless of your company size. If you export goods from the U.S., you may wish to consider looking into whether an IC-DISC makes sense for your business. Exporters should consult with tax counsel when making such determinations.

The U.S. Commercial Service can provide publicly available IRS guidance on the benefits of establishing an IC-DISC. However, you should engage a tax professional to determine eligibility and whether the IC-DISC is right for your business model.

Reach out to your local U.S. Commercial Service Office to explore ways to enter new overseas markets and increase your international sales. 

Note: The U.S. Commercial Service mandate includes providing exporters with information on all export promotion and export finance activities of the Federal Government. The information in this article is derived from publicly available information about an Internal Revenue Code provision. The information in this article is not legal or tax advice. Please contact the  Internal Revenue Service, tax counsel, or a tax professional if you are interested in more information about this provision. 

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Global Business Navigator Chatbot Beta

Welcome to the Global Business Navigator, an artificial intelligence (AI) Chatbot from the International Trade Administration (ITA). This tool, currently in beta version testing, is designed to provide general information on the exporting process and the resources available to assist new and experienced U.S. exporters. The Chatbot, developed using Microsoft’s Azure AI services, is trained on ITA’s export-related content and aims to quickly get users the information they need. The Chatbot is intended to make the benefits of exporting more accessible by understanding non-expert language, idiomatic expressions, and foreign languages.

Limitations

As a beta product, the Chatbot is currently being tested and its responses may occasionally produce inaccurate or incomplete information. The Chatbot is trained to decline out of scope or inappropriate requests. The Chatbot’s knowledge is limited to the public information on the Export Solutions web pages of Trade.gov, which covers a wide range of topics on exporting. While it cannot provide responses specific to a company’s product or a specific foreign market, its reference pages will guide you to other relevant government resources and market research. Always double-check the Chatbot’s responses using the provided references or by visiting the Export Solutions web pages on Trade.gov. Do not use its responses as legal or professional advice. Inaccurate advice from the Chatbot would not be a defense to violating any export rules or regulations.

Privacy

The Chatbot does not collect information about users and does not use the contents of users’ chat history to learn new information. All feedback is anonymous. Please do not enter personally identifiable information (PII), sensitive, or proprietary information into the Chatbot. Your conversations will not be connected to other interactions or accounts with ITA. Conversations with the Chatbot may be reviewed to help ITA improve the tool and address harmful, illegal, or otherwise inappropriate questions.

Translation

The Chatbot supports a wide range of languages. Because the Chatbot is trained in English and responses are translated, you should verify the translation. For example, the Chatbot may have difficulty with acronyms, abbreviations, and nuances in a language other than English.

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