IC-DISC Tax Planning for 2009-10 

With many Tax Proposals being considered for the Fall of 2009, the question becomes, what could be the potential impact on IC-DISCs ?  Focusing only on the Tax Rate spread between Qualified Dividends and Business Income Rates for individuals, the following proposals could have a modest impact on the current spread of 20%.

Taxpayers up to $250,000 in Taxable income. Generally,  there doesn't seem to be an important changes for this group until possibly 2010, at which time many of the Tax Break extensions will have ended, many traditional itemized deductions will be phased out or at least downsized.  In essence, while one may anticipate an overall incremental increase in Income Taxes,  very little, if any, should affect the 20% spread factor. Taxpayers over $250,000 in Taxable income. In addition to the above prospective changes, which affect all Taxpayers, those in this grouping may also be subject one or two stage Tax Rate increases,  due to being categorized as Upper Income Individuals. Again, while their Income Taxes will definitely increase in all categories,  the 20% spread factor should remain relatively constant.

Our basic conclusion: The 20% spread factor will remain,  absent a change directed at Qualified Dividends in general or specifically,  from IC-DISCs.