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Foreign-Derived Intangible Income (FDII)

Income a U.S. company earns from selling goods, services, or intellectual property (like patents or software) to foreign customers, where the intellectual property was developed in the U.S.

Deduction

An amount that can be subtracted from income before calculating taxes, resulting in a lower taxable income and thus a lower tax bill.

Internal Revenue Code of 1986

The main body of federal tax laws in the United States.

Effective tax rate

The actual percentage of income a company pays in taxes after all deductions, credits, and other adjustments are applied.

Intellectual property

Creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce (e.g., patents, copyrights, trademarks).