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Title 26 — Internal Revenue CodeRelease 119-73

§892 Income of Foreign Governments and of International Organizations

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter N— Tax Based on Income From Sources Within or Without the United States › Part II— NONRESIDENT ALIENS AND FOREIGN CORPORATIONS › Subpart D— Miscellaneous Provisions › § 892

Last updated Apr 6, 2026|Official source

Summary

Foreign governments do not pay U.S. tax on income from their investments here — stocks, bonds, and other domestic securities, financial instruments held to carry out monetary policy, and interest on their deposits in U.S. banks. But the exemption has limits. It does not cover income from commercial activity anywhere in the world, or income received from or through a "controlled commercial entity" — a business in which the government holds 50 percent or more of the value or votes, or otherwise has effective control — or gains from selling an interest in such an entity. International organizations get a broader break: their U.S. investment income, bank interest, and other U.S.-source income is exempt from this tax entirely. A foreign government is treated as a corporate resident of its country, and for treaty purposes only if it gives the U.S. government equivalent treatment.

Full Legal Text

Title 26, §892

Internal Revenue Code — Source: USLM XML via OLRC

(a)(1)The income of foreign governments received from—
(A)investments in the United States in—
(i)stocks, bonds, or other domestic securities owned by such foreign governments, or
(ii)financial instruments held in the execution of governmental financial or monetary policy, or
(B)interest on deposits in banks in the United States of moneys belonging to such foreign governments,
(2)(A)Paragraph (1) shall not apply to any income—
(i)derived from the conduct of any commercial activity (whether within or outside the United States),
(ii)received by a controlled commercial entity or received (directly or indirectly) from a controlled commercial entity, or
(iii)derived from the disposition of any interest in a controlled commercial entity.
(B)For purposes of subparagraph (A), the term “controlled commercial entity” means any entity engaged in commercial activities (whether within or outside the United States) if the government—
(i)holds (directly or indirectly) any interest in such entity which (by value or voting interest) is 50 percent or more of the total of such interests in such entity, or
(ii)holds (directly or indirectly) any other interest in such entity which provides the foreign government with effective control of such entity.
(3)For purposes of this title, a foreign government shall be treated as a corporate resident of its country. A foreign government shall be so treated for purposes of any income tax treaty obligation of the United States if such government grants equivalent treatment to the Government of the United States.
(b)The income of international organizations received from investments in the United States in stocks, bonds, or other domestic securities owned by such international organizations, or from interest on deposits in banks in the United States of moneys belonging to such international organizations, or from any other source within the United States, shall not be included in gross income and shall be exempt from taxation under this subtitle.
(c)The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

1990—Subsec. (a)(2)(A). Pub. L. 101–508 made clarifying amendment to Pub. L. 100–647, § 1012(t)(1). See 1988 Amendment note below. 1988—Subsec. (a)(2)(A). Pub. L. 100–647, § 1012(t)(1), (2), as amended by Pub. L. 101–508, amended cl. (ii) generally and added cl. (iii). Prior to amendment, cl. (ii) read as follows: “received from or by a controlled commercial entity.” Subsec. (a)(3). Pub. L. 100–647, § 1012(t)(3), added par. (3). 1986—Pub. L. 99–514 amended section generally. Prior to amendment, section read as follows: “The income of foreign governments or international organizations received from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign governments or by international organizations, or from interest on deposits in banks in the United States of moneys belonging to such foreign governments or international organizations, or from any other source within the United States, shall not be included in gross income and shall be exempt from taxation under this subtitle.”

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Effective Date

of 1986 Amendment Pub. L. 99–514, title XII, § 1247(b), Oct. 22, 1986, 100 Stat. 2584, provided that: “The amendment made by subsection (a) [amending this section] shall apply to amounts received on or after July 1, 1986, except that no amount shall be required to be deducted and withheld by reason of the amendment made by subsection (a) from any payment made before the date of the enactment of this Act [Oct. 22, 1986].” Applicability of Certain

Amendments

by Pub. L. 99–514 in Relation to Treaty Obligations of United StatesFor nonapplication of amendment by section 1247(a) of Pub. L. 99–514 to the extent application of such amendment would be contrary to any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(3), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 892

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73