Did You Know the U.S. Once Endorsed an Offshore Tax Shelter?
May 21, 2025
“What ever happen to the FISK?.”
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One of the more interesting offshore entities was the FISK. This controversial structure was designed as a US endorsed tax shelter and well worth a look back.
As a matter of official policy, the United States welcomes foreign investment; very few restrictions are placed on such investment and usually only as a matter of national security. As a rule of thumb, the export of goods and the importing of currency are encouraged, while conversely, the importing of goods and exporting of currency are discouraged. “Foreign Sales Corporations” also known as “Fisks” or “FSCs” reflected that perspective.
FSCs were a tax incentive authorized under the Deficit Reduction Act of 1984 and manifested in the Internal Revenue Code. Few were aware that they existed, but Foreign Sales Corporations remained recognized and endorsed by the U.S. Commerce Department. As of January 1, 1985, U.S. exporters of products, architectural services and engineering services could qualify for a substantial tax benefit. Congress created the program to give a tax break to companies that export or lease manufactured goods that are at least 50 percent made in America. To employ this program, a manufacturer had to establish an International Business Corporation in one of 35 approved offshore jurisdictions. The IBC or offshore corporation would be empowered to have a bank account and conduct annual meetings. Tax savings ensue with the culmination of an overseas sale, and the benefits could amount to tens of thousands of dollars per year.
The United States has a history of enacting legislation to provide export encouragement or industrial incentives. Tax deferrals or exemptions have been granted to corporations that meet established guidelines. In addition, there are numerous other incentives that have been put in place by the United States government to attract foreign investment. This is commonplace throughout the world. These “tax holidays” are believed to create new jobs within the country and increase exports.
The FISK business model which is now defunct was one in a series of measures designed to support U.S. exporters. It followed on from domestic international sales corporations (DISCS) and was replaced by the Extraterritorial Income Exclusion Act (ETI) in 2000. All of these were successively challenged in—and found to be non-compliant. After much fighting between the United States and the European Union, the issue was taken to the World Trade Organization (WTO) in1999. Eventually, the FISK business model faded away. Nonetheless, it provides an interesting look into the world of “endorsed” tax shelters and tax havens.
