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Title 26 — Internal Revenue CodeRelease 119-73

§895 Income Derived by a Foreign Central Bank of Issue From Obligations of the United States or From Bank Deposits

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 › § 895

Last updated Apr 6, 2026|Official source

Summary

A foreign central bank pays no U.S. income tax on what it earns from U.S. government obligations it owns or from interest on deposits with banks. The exemption is lost if those obligations or deposits are held for or used in commercial banking or other commercial activities. The Bank for International Settlements gets the same treatment as a foreign central bank.

Full Legal Text

Title 26, §895

Internal Revenue Code — Source: USLM XML via OLRC

Income derived by a foreign central bank of issue from obligations of the United States or of any agency or instrumentality thereof (including beneficial interests, participations, and other instruments issued under section 302(c) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717)) which are owned by such foreign central bank of issue, or derived from interest on deposits with persons carrying on the banking business, shall not be included in gross income and shall be exempt from taxation under this subtitle unless such obligations or deposits are held for, or used in connection with, the conduct of commercial banking functions or other commercial activities. For purposes of the preceding sentence the Bank for International Settlements shall be treated as a foreign central bank of issue.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

1966—Pub. L. 89–809 exempted income derived from obligations of agencies or instrumentalities of the United States and income derived from interest on deposits with persons carrying on the banking business, inserted “(including beneficial interests, participations, and other instruments issued under section 302(c) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717)),” and inserted sentence requiring the Bank for International Settlements to be treated as a foreign central bank of issue.

Statutory Notes and Related Subsidiaries

Effective Date

of 1966 AmendmentAmendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, except that in applying section 864(c)(4)(B)(iii) of this title with respect to a binding contract entered into on or before Feb. 24, 1966, activities in the United States on or before such date in negotiating or carrying out such contract shall not be taken into account, see section 102(e)(1) of Pub. L. 89–809, set out as a note under section 861 of this title.

Effective Date

Pub. L. 87–29, § 1(c), May 4, 1961, 75 Stat. 64, provided that: “The

Amendments

made by subsections (a) and (b) [enacting this section and amending analysis preceding section 891 of this title] shall be effective with respect to income received in taxable years beginning after December 31, 1960.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 895

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73