What is an IC-DISC?

An IC-DISC, or Interest Charge Domestic International Sales Corporation, is specifically designed to provide tax incentives to U.S. exporters. By establishing an IC-DISC, companies can benefit from significant tax savings on export income. This mechanism allows businesses, primarily those engaged in the sale of goods to foreign customers, to receive a commission for the sale of exported products.

The structure enables profits to be taxed at a lower rate, as the commissions can be accrued, which may effectively be taxed at the capital gains rate rather than the ordinary income rate. This financial tool encourages U.S. companies to increase their global presence and promote exports, thereby supporting international trade.

Other options do not accurately capture the nature and purpose of an IC-DISC. For instance, while some organizations may focus on international trade, an IC-DISC is not a non-profit entity. Similarly, it is not merely a technical advisory firm nor is it a broad government initiative for tax reform. Rather, it is a very specific and strategic financial arrangement aimed at benefiting U.S. companies that engage in export activities.