as the potential to lower the tax liability of those who export produce out of the US. Though the specific tax implications vary from State to State, virtually anyone who exports goods out of the US can benefit from an often overlooked tax vehicle called an IC-DISC.IC-DISC stands for Interest Charge – Domestic International Sales Corporation, which is a special type of DISC, explained Bradley Gould, a member of the Agribusiness Industry Team at the law firm of Dean, Mead, Minton & Zwemer. An IC-DISC is a tax exempt entity that serves as a commission agent for exporters and allows exporters to enjoy a significantly lower tax rate on a portion of their sales.
“A deducti
ble fee is paid to the IC-DISC by the exporter to the IC-DISC, and because the money distributed from the DISC is considered dividend income, it's taxed at a lower rate,” said Gould. If a business were to export produce directly, revenue from that would be taxed at a higher rate. But if a business sets up and exports their produce through an IC-DISC, the tax liability is lower.Gould said that many companies used DISCs until 1984, when changes in tax laws removed the tax benefits of employing a DISC. More recently, tax cuts enacted by President George W. Bush made IC-DISCs a worthwhile option, but exporters have been slow to adopt the tax vehicle this time around. Gould said that, for exporters of produce, it's a worthwhile thing to look into, as the tax benefits could be significant.
“It's a good way to save on taxes,” said Gould. “There's really no reason not to do one.”