§892 Income of Foreign Governments and of International Organizations

Summary

Foreign governments do not have to count as U.S. taxable income the money they get from U.S. investments like stocks, bonds, other domestic securities, financial instruments used for monetary policy, or interest on money they keep in U.S. banks. That tax break does not apply if the income comes from running a business, if it is earned by or passed through a controlled commercial entity, or if it comes from selling an interest in such an entity. A controlled commercial entity is one the government owns 50 percent or more of (by value or votes) or otherwise effectively controls. A central bank is treated as a controlled commercial entity only if it does commercial business in the United States. International organizations get the same exemption for U.S. investments, bank interest, or other U.S.-source income. For tax rules, a foreign government is treated like a corporate resident of its own country and is treated the same under income tax treaties only if its country gives the U.S. government the same treatment. The Secretary will make any rules needed to carry out these provisions.