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The Portfolio discusses the development of the exemption under §892(a) for foreign governments, particularly the limitations placed on the scope of the exemption by the 1986 Tax Reform Act and by the 1988 temporary regulations. It analyzes in detail what types of organizations are exempt from tax and what kinds of income received by such organizations are exempt from tax. There is an extensive analysis of the issues raised by the regulations under §892 and the ambiguities still present in the law. Tax planning suggestions are also presented and analyzed. It further explores the broader income tax exemption available to certain international organizations under §892(b).
The Portfolio also discusses §893, which
exempts employees of foreign governments and international organizations
from income tax, and §895, which exempts foreign central banks
from income tax. The Portfolio also raises the possibility of exemption
through income tax treaties, other international agreements, and other
A. International Sovereign Immunity
B. Basic Statutory Provisions
1. Section 892
2. Section 893
3. Section 895
II. Exemption from U.S. Income Taxation of Foreign Governments and International Organizations Under § 892
B. Scope of the § 892 Exemption
C. Exempt Organizations under the Temporary Regulations
1. "Foreign Government" vs. "Foreign Sovereign"
2. "Integral Parts" of a "Foreign Sovereign"
3. "Controlled Entities" of a "Foreign Sovereign"
4. Pension Trusts for Employees of Foreign Governments
5. "Political Subdivisions" and "Transnational Entities"
D. Exempt Income of Foreign Governments
1. Types of Income
a. Bank Interest
b. Income from Stocks, Bonds, or Other Domestic Securities
(1) Partnership Issues
(2) USRPHC and REIT Issues
c. Income from Financial Instruments
d. Special Issues
(2) Notional Principal Contracts
2. Investment Sources vs. Commercial Activities
3. Cultural Events
4. Purchase of Goods
5. Not for Profit Activities
6. Governmental Functions
7. Activities Other than Trade or Business
8. Portfolio Investments
a. Dealer Activities
b. Volume of Transactions
c. Banking, Financing, etc. and Effectively Connected Activity
e. Real Property Activities
9. Controlled Commercial Entities
E. Exempt Income of International Organizations
F. Effective Date Issues
G. Tax Reporting
III. Exemption from U.S. Income Taxation of Compensation of Employees of Foreign Governments and International Organizations Under § 893
A. Scope of the § 893 Exemption
B. Filing Requirements
C. Waiving the § 893 Exemption
IV. Exemption from U.S. Income Taxation of Foreign Central Banks Under § 895
V. Other Exemption Possibilities
A. Income Tax Treaties
B. Other International Agreements
Table of Worksheets
Worksheet 1 S. Rep. No. 313, 99th Cong., 2d Sess. 415 (1986)
Worksheet 2 H.R. Rep. No. 841, 99th Cong., 2d Sess. (Vol. II), II-654 (1986) (Conference Report)
Worksheet 3 Qualifying International Organizations
Worksheet 4 Form W-8EXP, Certificate of Foreign Governments or Other Foreign Organization for U.S. Tax Withholding
Treasury Revenue Procedures and Revenue Rulings:
Reports and Treatises:
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