§892 — Income of foreign governments and of international organizations

Statute Text — 26 U.S.C. §892

Treasury Regulations

• Treas. Reg. §1.892-1TPurpose and scope of regulations (temporary regulations) Show full text ▾ Collapse ▴

  (a) In general. These regulations provide guidance with respect to the taxation of income derived by foreign governments and international organizations from sources within the United States. Under section 892, certain specific types of income received by foreign governments are excluded from gross income and are exempt, unless derived from the conduct of a commercial activity or received from or by a controlled commercial entity. This section sets forth the effective date of the regulations. Section 1.892-2T defines a foreign government. In particular it describes the extent to which either an integral part of a foreign sovereign or an entity which is not an integral part of a foreign sovereign will be treated as a foreign government for purposes of section 892. Section 1.892-3T describes the types of income that generally qualify for exemption and certain limitations on the exemption. Section 1.892-4T provides rules concerning the characterization of activities as commercial activities. Section 1.892-5T defines a controlled commercial entity. Section 1.892-6T sets forth the extent to which income of international organizations from sources within the United States is excluded from gross income and is exempt from taxation. Section 1.892-7T sets forth the relationship of section 892 to other Internal Revenue Code sections.

  (b) Effective date. The regulations set forth in §§ 1.892-1T through 1.892-7T apply to income received by a foreign government on or after July 1, 1986. No amount of income shall be required to be deducted and withheld, by reason of the amendment of section 892 by section 1247 of the Tax Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085, 2583) from any payment made before October 22, 1986.

• Treas. Reg. §1.892-1T(a)In general. Show full text ▾ Collapse ▴

  In general. These regulations provide guidance with respect to the taxation of income derived by foreign governments and international organizations from sources within the United States. Under section 892, certain specific types of income received by foreign governments are excluded from gross income and are exempt, unless derived from the conduct of a commercial activity or received from or by a controlled commercial entity. This section sets forth the effective date of the regulations. Section 1.892-2T defines a foreign government. In particular it describes the extent to which either an integral part of a foreign sovereign or an entity which is not an integral part of a foreign sovereign will be treated as a foreign government for purposes of section 892. Section 1.892-3T describes the types of income that generally qualify for exemption and certain limitations on the exemption. Section 1.892-4T provides rules concerning the characterization of activities as commercial activities. Section 1.892-5T defines a controlled commercial entity. Section 1.892-6T sets forth the extent to which income of international organizations from sources within the United States is excluded from gross income and is exempt from taxation. Section 1.892-7T sets forth the relationship of section 892 to other Internal Revenue Code sections.

• Treas. Reg. §1.892-1T(b)Effective date. Show full text ▾ Collapse ▴

  Effective date. The regulations set forth in §§ 1.892-1T through 1.892-7T apply to income received by a foreign government on or after July 1, 1986. No amount of income shall be required to be deducted and withheld, by reason of the amendment of section 892 by section 1247 of the Tax Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085, 2583) from any payment made before October 22, 1986.

• Treas. Reg. §1.892-2TForeign government defined (temporary regulations) Show full text ▾ Collapse ▴

  (a) Foreign government—(1) Definition. The term “foreign government” means only the integral parts or controlled entities of a foreign sovereign.

  (2) Integral part. An “integral part” of a foreign sovereign is any person, body of persons, organization, agency, bureau, fund, instrumentality, or other body, however designated, that constitutes a governing authority of a foreign country. The net earnings of the governing authority must be credited to its own account or to other accounts of the foreign sovereign, with no portion inuring to the benefit of any private person. An integral part does not include any individual who is a sovereign, official, or administrator acting in a private or personal capacity. Consideration of all the facts and circumstances will determine whether an individual is acting in a private or personal capacity.

  (3) Controlled entity. The term “controlled entity” means an entity that is separate in form from a foreign sovereign or otherwise constitute a separate juridical entity if it satisfies the following requirements:

  (i) It is wholly owned and controlled by a foreign sovereign directly or indirectly through one or more controlled entities;

  (ii) It is organized under the laws of the foreign sovereign by which owned;

  (iii) Its net earnings are credited to its own account or to other accounts of the foreign sovereign, with no portion of its income inuring to the benefit of any private person; and

  (iv) Its assets vest in the foreign sovereign upon dissolution.

  A controlled entity does not include partnerships or any other entity owned and controlled by more than one foreign sovereign. Thus, a foreign financial organization organized and wholly owned and controlled by several foreign sovereigns to foster economic, financial, and technical cooperation between various foreign nations is not a controlled entity for purposes of this section.

  (b) Inurement to the benefit of private persons. For purposes of this section, income will be presumed not to inure to the benefit of private persons if such persons (within the meaning of section 7701(a)(1)) are the intended beneficiaries of a governmental program which is carried on by the foreign sovereign and the activities of which constitute governmental functions (within the meaning of § 1.892-4T(c)(4)). Income will be considered to inure to the benefit of private persons if such income benefits:

  (1) Private persons through the use of a governmental entity as a conduit for personal investment; or

  (2) Private persons who divert such income from its intended use by the exertion of influence or control through means explicitly or implicitly approved of by the foreign sovereign.

  (c) Pension trusts—(1) In general. A controlled entity includes a separately organized pension trust if it meets the following requirements:

  (i) The trust is established exclusively for the benefit of (A) employees or former employees of a foreign government or (B) employees or former employees of a foreign government and non-governmental employees or former employees that perform or performed governmental or social services;

  (ii) The funds that comprise the trust are managed by trustees who are employees of, or persons appointed by, the foreign government;

  (iii) The trust forming a part of the pension plan provides for retirement, disability, or death benefits in consideration for prior services rendered; and

  (iv) Income of the trust satisfies the obligations of the foreign government to participants under the plan, rather than inuring to the benefit of a private person.

  Income of a pension trust is subject to the rules of § 1.892-5T(b)(3) regarding the application of the rules for controlled commercial entities to pension trusts. Income of a superannuation or similar pension fund of an integral part or controlled entity (which is not a separate pension trust as defined in this paragraph (c)(1)) is subject to the rules that generally apply to a foreign sovereign. Such a pension fund may also benefit non-governmental employees or former employees that perform or performed governmental or social services.

  (2) Illustrations. The following examples illustrate the application of paragraph (c)(1).

  (d) Political subdivision and transnational entity. The rules that apply to a foreign sovereign apply to political subdivisions of a foreign country and to transnational entities. A transnational entity is an organization created by more than one foreign sovereign that has broad powers over external and domestic affairs of all participating foreign countries stretching beyond economic subjects to those concerning legal relations and transcending state or political boundaries.

• Treas. Reg. §1.892-2T(a)Foreign government—(1) Definition. Show full text ▾ Collapse ▴

  Foreign government—(1) Definition. The term “foreign government” means only the integral parts or controlled entities of a foreign sovereign.

  (2) Integral part. An “integral part” of a foreign sovereign is any person, body of persons, organization, agency, bureau, fund, instrumentality, or other body, however designated, that constitutes a governing authority of a foreign country. The net earnings of the governing authority must be credited to its own account or to other accounts of the foreign sovereign, with no portion inuring to the benefit of any private person. An integral part does not include any individual who is a sovereign, official, or administrator acting in a private or personal capacity. Consideration of all the facts and circumstances will determine whether an individual is acting in a private or personal capacity.

  (3) Controlled entity. The term “controlled entity” means an entity that is separate in form from a foreign sovereign or otherwise constitute a separate juridical entity if it satisfies the following requirements:

• Treas. Reg. §1.892-2T(b)Inurement to the benefit of private persons. Show full text ▾ Collapse ▴

  Inurement to the benefit of private persons. For purposes of this section, income will be presumed not to inure to the benefit of private persons if such persons (within the meaning of section 7701(a)(1)) are the intended beneficiaries of a governmental program which is carried on by the foreign sovereign and the activities of which constitute governmental functions (within the meaning of § 1.892-4T(c)(4)). Income will be considered to inure to the benefit of private persons if such income benefits:

  (1) Private persons through the use of a governmental entity as a conduit for personal investment; or

  (2) Private persons who divert such income from its intended use by the exertion of influence or control through means explicitly or implicitly approved of by the foreign sovereign.

• Treas. Reg. §1.892-2T(c)Pension trusts—(1) In general. Show full text ▾ Collapse ▴

  Pension trusts—(1) In general. A controlled entity includes a separately organized pension trust if it meets the following requirements:

• Treas. Reg. §1.892-2T(d)Political subdivision and transnational entity. Show full text ▾ Collapse ▴

  Political subdivision and transnational entity. The rules that apply to a foreign sovereign apply to political subdivisions of a foreign country and to transnational entities. A transnational entity is an organization created by more than one foreign sovereign that has broad powers over external and domestic affairs of all participating foreign countries stretching beyond economic subjects to those concerning legal relations and transcending state or political boundaries.

• Treas. Reg. §1.892-2T(i)§1.892-2T(i) Show full text ▾ Collapse ▴

  The trust is established exclusively for the benefit of (A) employees or former employees of a foreign government or (B) employees or former employees of a foreign government and non-governmental employees or former employees that perform or performed governmental or social services;

  (ii) The funds that comprise the trust are managed by trustees who are employees of, or persons appointed by, the foreign government;

  (iii) The trust forming a part of the pension plan provides for retirement, disability, or death benefits in consideration for prior services rendered; and

  (iv) Income of the trust satisfies the obligations of the foreign government to participants under the plan, rather than inuring to the benefit of a private person.

  Income of a pension trust is subject to the rules of § 1.892-5T(b)(3) regarding the application of the rules for controlled commercial entities to pension trusts. Income of a superannuation or similar pension fund of an integral part or controlled entity (which is not a separate pension trust as defined in this paragraph (c)(1)) is subject to the rules that generally apply to a foreign sovereign. Such a pension fund may also benefit non-governmental employees or former employees that perform or performed governmental or social services.

  (2) Illustrations. The following examples illustrate the application of paragraph (c)(1).

• Treas. Reg. §1.892-3Income of foreign governments Show full text ▾ Collapse ▴

  (a) Types of income exempt—(1) In general. For further guidance, see § 1.892-3T(a)(1).

  (2) Income from investments. For further guidance, see § 1.892-3T(a)(2).

  (3) Securities. For further guidance, see § 1.892-3T(a)(3).

  (4) Financial instrument—(i) Definition. For purposes of this paragraph (a), the term financial instrument includes:

  (A) Any interest rate, currency, equity, or commodity (as the term is used in section 864(b)(2)(B) and § 1.864-2(d)) notional principal contract (as the term is used in section 475(c)(2)); or

  (B) Any evidence of an interest in options, forward or futures contracts, and any other similar contracts, the value of which, or any payment or other transfer with respect to which, is (directly or indirectly) determined by reference to one or more of the following:

  (1) Commodity (as the term is used in section 864(b)(2)(B) and § 1.864-2(d));

  (2) Currency;

  (3) Share of stock;

  (4) Partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust;

  (5) Note, bond, debenture, or other evidence of indebtedness; or

  (6) Notional principal contract described in paragraph (a)(4)(i)(A) of this section.

  (ii) Special rule. For purposes of paragraph (a)(4)(i) of this section, nonfunctional currency or gold is a financial instrument when physically held by a foreign central bank of issue (as defined in § 1.895-1(b)).

  (5) Execution of financial or monetary policy. For further guidance, see § 1.892-3T(a)(5).

  (6) Dividend equivalents. Income from investments in stocks includes the payment of a dividend equivalent described in section 871(m) and the regulations in this part under section 871(m).

  (b) Illustrations. For further guidance, see § 1.892-3T(b).

  (c) Applicability dates. (1) Paragraph (a)(4) of this section applies to taxable years beginning on or after December 15, 2025. See § 1.892-3T(a)(4), as contained in 26 CFR in part 1 in effect on April 1, 2025, for the rules that apply to taxable years beginning before December 15, 2025. A taxpayer may choose to apply paragraph (a)(4) of this section to a taxable year beginning before December 15, 2025, if the period of limitations on assessment of the taxable year is open under section 6501 and the taxpayer and entities that are related (within the meaning of section 267(b) or section 707(b)) to the taxpayer apply this rule and §§ 1.892-4 and 1.892-5 in their entirety to the taxable year and all succeeding taxable years beginning before December 15, 2025.

  (2) Paragraph (a)(6) of this section applies to payments made on or after December 5, 2013.

• Treas. Reg. §1.892-3(a)Types of income exempt—(1) In general. Show full text ▾ Collapse ▴

  Types of income exempt—(1) In general. For further guidance, see § 1.892-3T(a)(1).

  (2) Income from investments. For further guidance, see § 1.892-3T(a)(2).

  (3) Securities. For further guidance, see § 1.892-3T(a)(3).

  (4) Financial instrument—(i) Definition. For purposes of this paragraph (a), the term financial instrument includes:

  (A) Any interest rate, currency, equity, or commodity (as the term is used in section 864(b)(2)(B) and § 1.864-2(d)) notional principal contract (as the term is used in section 475(c)(2)); or

  (B) Any evidence of an interest in options, forward or futures contracts, and any other similar contracts, the value of which, or any payment or other transfer with respect to which, is (directly or indirectly) determined by reference to one or more of the following:

  (1) Commodity (as the term is used in section 864(b)(2)(B) and § 1.864-2(d));

  (2) Currency;

  (3) Share of stock;

  (4) Partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust;

  (5) Note, bond, debenture, or other evidence of indebtedness; or

  (6) Notional principal contract described in paragraph (a)(4)(i)(A) of this section.

  (ii) Special rule. For purposes of paragraph (a)(4)(i) of this section, nonfunctional currency or gold is a financial instrument when physically held by a foreign central bank of issue (as defined in § 1.895-1(b)).

  (5) Execution of financial or monetary policy. For further guidance, see § 1.892-3T(a)(5).

  (6) Dividend equivalents. Income from investments in stocks includes the payment of a dividend equivalent described in section 871(m) and the regulations in this part under section 871(m).

• Treas. Reg. §1.892-3(b)Illustrations. Show full text ▾ Collapse ▴

  Illustrations. For further guidance, see § 1.892-3T(b).

• Treas. Reg. §1.892-3(c)Applicability dates. Show full text ▾ Collapse ▴

  Applicability dates. (1) Paragraph (a)(4) of this section applies to taxable years beginning on or after December 15, 2025. See § 1.892-3T(a)(4), as contained in 26 CFR in part 1 in effect on April 1, 2025, for the rules that apply to taxable years beginning before December 15, 2025. A taxpayer may choose to apply paragraph (a)(4) of this section to a taxable year beginning before December 15, 2025, if the period of limitations on assessment of the taxable year is open under section 6501 and the taxpayer and entities that are related (within the meaning of section 267(b) or section 707(b)) to the taxpayer apply this rule and §§ 1.892-4 and 1.892-5 in their entirety to the taxable year and all succeeding taxable years beginning before December 15, 2025.

  (2) Paragraph (a)(6) of this section applies to payments made on or after December 5, 2013.

• Treas. Reg. §1.892-3TIncome of foreign governments (temporary regulations) Show full text ▾ Collapse ▴

  (a) Types of income exempt—(1) In general. Subject to the exceptions contained in §§ 1.892-4T and 1.892-5T for income derived from the conduct of a commercial activity or received from or by a controlled commercial entity, the following types of income derived by a foreign government (as defined in § 1.892-2T) are not included in gross income and are exempt:

  (i) Income from investments in the United States in stocks, bonds, or other securities;

  (ii) Income from investments in the United States in financial instruments held in the execution of governmental financial or monetary policy; and

  (iii) Interest on deposits in banks in the United States of moneys belonging to such foreign government.

  Income derived from sources other than described in this paragraph (such as income earned from a U.S. real property interest described in section 897(c)(1)(A)(i)) is not exempt from taxation under section 892. Furthermore, any gain derived from the disposition a U.S. real property interest defined in section 897(c)(1)(A)(i) shall in no event qualify for exemption under section 892.

  (2) Income from investments. For purposes of paragraph (a) of this section, income from investments in stocks, bonds or other securities includes gain from their disposition and income earned from engaging in section 1058 securities lending transactions. Gain on the disposition of an interest in a partnership or a trust is not exempt from taxation under section 892.

  (3) Securities. For purposes of paragraph (a) of this section, the term “other securities” includes any note or other evidence of indebtedness. Thus, an annuity contract, a mortgage, a banker's acceptance or a loan are securities for purposes of this section.

  However, the term “other securities” does not include partnership interests (with the exception of publicly traded partnerships within the meaning of section 7704) or trust interests. The term also does not include commodity forward or futures contracts and commodity options unless they constitute securities for purposes of section 864(b)(2)(A).

  (4) Financial instrument. For further guidance, see § 1.892-3(a)(4).

  (5) Execution of financial or monetary policy—(i) Rule. A financial instrument shall be deemed held in the execution of governmental financial or monetary policy if the primary purpose for holding the instrument is to implement or effectuate such policy.

  (ii) Illustration. The following example illustrates the application of this paragraph (a)(5).

  (b) Illustrations. The principles of paragraph (a) of this section may be illustrated by the following examples.

• Treas. Reg. §1.892-3T(a)Types of income exempt—(1) In general. Show full text ▾ Collapse ▴

  Types of income exempt—(1) In general. Subject to the exceptions contained in §§ 1.892-4T and 1.892-5T for income derived from the conduct of a commercial activity or received from or by a controlled commercial entity, the following types of income derived by a foreign government (as defined in § 1.892-2T) are not included in gross income and are exempt:

• Treas. Reg. §1.892-3T(b)Illustrations. Show full text ▾ Collapse ▴

  Illustrations. The principles of paragraph (a) of this section may be illustrated by the following examples.

• Treas. Reg. §1.892-3T(i)§1.892-3T(i) Show full text ▾ Collapse ▴

  Income from investments in the United States in stocks, bonds, or other securities;

  (ii) Income from investments in the United States in financial instruments held in the execution of governmental financial or monetary policy; and

  (iii) Interest on deposits in banks in the United States of moneys belonging to such foreign government.

  Income derived from sources other than described in this paragraph (such as income earned from a U.S. real property interest described in section 897(c)(1)(A)(i)) is not exempt from taxation under section 892. Furthermore, any gain derived from the disposition a U.S. real property interest defined in section 897(c)(1)(A)(i) shall in no event qualify for exemption under section 892.

  (2) Income from investments. For purposes of paragraph (a) of this section, income from investments in stocks, bonds or other securities includes gain from their disposition and income earned from engaging in section 1058 securities lending transactions. Gain on the disposition of an interest in a partnership or a trust is not exempt from taxation under section 892.

  (3) Securities. For purposes of paragraph (a) of this section, the term “other securities” includes any note or other evidence of indebtedness. Thus, an annuity contract, a mortgage, a banker's acceptance or a loan are securities for purposes of this section.

  However, the term “other securities” does not include partnership interests (with the exception of publicly traded partnerships within the meaning of section 7704) or trust interests. The term also does not include commodity forward or futures contracts and commodity options unless they constitute securities for purposes of section 864(b)(2)(A).

  (4) Financial instrument. For further guidance, see § 1.892-3(a)(4).

  (5) Execution of financial or monetary policy—(i) Rule. A financial instrument shall be deemed held in the execution of governmental financial or monetary policy if the primary purpose for holding the instrument is to implement or effectuate such policy.

  (ii) Illustration. The following example illustrates the application of this paragraph (a)(5).

• Treas. Reg. §1.892-4Commercial activities Show full text ▾ Collapse ▴

  (a) Purpose. The exemption generally applicable to a foreign government (as defined in § 1.892-2T) for income described in §§ 1.892-3T and 1.892-3 does not apply to income derived from the conduct of commercial activity (whether within or outside the United States), income received by a controlled commercial entity or received (directly or indirectly) from a controlled commercial entity, or income derived from the disposition of any interest in a controlled commercial entity. This section provides rules for determining whether income is derived from the conduct of commercial activity. The rules in this section also apply in determining under §§ 1.892-5T and 1.892-5 whether an entity is a controlled commercial entity.

  (b) In general. Except as provided in paragraph (c) of this section, all activities (whether conducted within or outside the United States) that are ordinarily conducted for the current or future production of income or gain are commercial activities. Only the nature of the activity, not the purpose or motivation for conducting the activity, is determinative of whether the activity is commercial in character. For purposes of this paragraph (b), activities that constitute a trade or business for purposes of section 162 or constitute (or would constitute if undertaken in the United States) a trade or business in the United States for purposes of section 864(b) are commercial activities except as otherwise provided in paragraph (c) of this section.

  (c) Activities that are not commercial—(1) Investments—(i) In general. Subject to the provisions of this paragraph (c), the following are not commercial activities: investments in stocks, bonds, and other securities (as defined in § 1.892-3T(a)(3)); loans; investments in financial instruments (as defined in § 1.892-3(a)(4)); the holding of partnership equity interests; the holding of net leases on real property; the holding of real property which is not producing income (other than on its sale or from an investment in net leases on real property); and the holding of deposits in any currency in banks. Transferring securities under a loan agreement which meets the requirements of section 1058 is an investment for purposes of this paragraph (c)(1)(i). An activity will not cease to be an investment solely because of the volume of transactions of that activity or because of other unrelated activities.

  (ii) [Reserved]

  (iii) Banking, financing, etc. For further guidance, see § 1.892-4T(c)(1)(iii).

  (2) Trading. Effecting transactions in stocks, bonds, other securities (as defined in § 1.892-3T(a)(3)), partnership equity interests, commodities, or financial instruments (as defined in § 1.892-3(a)(4)) for a foreign government's own account does not constitute commercial activity. Such transactions are not commercial activities regardless of whether they are effected by the foreign government through its employees or through a broker, commission agent, custodian, or other independent agent and regardless of whether or not any such employee or agent has discretionary authority to make decisions in effecting the transactions. Such transactions undertaken as a dealer (as determined under the principles of § 1.864-2(c)(2)(iv)(a)), however, constitute commercial activity. For purposes of this paragraph (c)(2), the term commodities means commodities of a kind customarily dealt in on an organized commodity exchange but only if the transaction is of a kind customarily consummated at such place.

  (3) Disposition of a U.S. real property interest. A disposition (including a deemed disposition under section 897(h)(1)) of a U.S. real property interest (as defined in section 897(c)), by itself, does not constitute the conduct of commercial activity. As described in § 1.892-3T(a), however, gain derived from a disposition of a U.S. real property interest defined in section 897(c)(1)(A)(i) will not qualify for exemption from tax under section 892.

  (4) Cultural events. For further guidance, see § 1.892-4T(c)(2).

  (5) Non-profit activities. For further guidance, see § 1.892-4T(c)(3).

  (6) Governmental functions. For further guidance, see § 1.892-4T(c)(4).

  (7) Purchasing. For further guidance, see § 1.892-4T(c)(5).

  (d) Applicability date. Except as otherwise provided in this paragraph (d), this section applies to taxable years beginning on or after December 15, 2025. See § 1.892-4T, as contained in 26 CFR in part 1 in effect on April 1, 2025, for the rules that apply to taxable years beginning before December 15, 2025. A taxpayer may choose to apply this section to a taxable year beginning before December 15, 2025, if the period of limitations on assessment of the taxable year is open under section 6501 and the taxpayer and entities that are related (within the meaning of section 267(b) or section 707(b)) to the taxpayer apply this section and §§ 1.892-3(a)(4) and 1.892-5 in their entirety to the taxable year and all succeeding taxable years beginning before December 15, 2025.

• Treas. Reg. §1.892-4(a)Purpose. Show full text ▾ Collapse ▴

  Purpose. The exemption generally applicable to a foreign government (as defined in § 1.892-2T) for income described in §§ 1.892-3T and 1.892-3 does not apply to income derived from the conduct of commercial activity (whether within or outside the United States), income received by a controlled commercial entity or received (directly or indirectly) from a controlled commercial entity, or income derived from the disposition of any interest in a controlled commercial entity. This section provides rules for determining whether income is derived from the conduct of commercial activity. The rules in this section also apply in determining under §§ 1.892-5T and 1.892-5 whether an entity is a controlled commercial entity.

• Treas. Reg. §1.892-4(b)In general. Show full text ▾ Collapse ▴

  In general. Except as provided in paragraph (c) of this section, all activities (whether conducted within or outside the United States) that are ordinarily conducted for the current or future production of income or gain are commercial activities. Only the nature of the activity, not the purpose or motivation for conducting the activity, is determinative of whether the activity is commercial in character. For purposes of this paragraph (b), activities that constitute a trade or business for purposes of section 162 or constitute (or would constitute if undertaken in the United States) a trade or business in the United States for purposes of section 864(b) are commercial activities except as otherwise provided in paragraph (c) of this section.

• Treas. Reg. §1.892-4(c)Activities that are not commercial—(1) Investments—(i) In general. Show full text ▾ Collapse ▴

  Activities that are not commercial—(1) Investments—(i) In general. Subject to the provisions of this paragraph (c), the following are not commercial activities: investments in stocks, bonds, and other securities (as defined in § 1.892-3T(a)(3)); loans; investments in financial instruments (as defined in § 1.892-3(a)(4)); the holding of partnership equity interests; the holding of net leases on real property; the holding of real property which is not producing income (other than on its sale or from an investment in net leases on real property); and the holding of deposits in any currency in banks. Transferring securities under a loan agreement which meets the requirements of section 1058 is an investment for purposes of this paragraph (c)(1)(i). An activity will not cease to be an investment solely because of the volume of transactions of that activity or because of other unrelated activities.

  (ii) [Reserved]

  (iii) Banking, financing, etc. For further guidance, see § 1.892-4T(c)(1)(iii).

  (2) Trading. Effecting transactions in stocks, bonds, other securities (as defined in § 1.892-3T(a)(3)), partnership equity interests, commodities, or financial instruments (as defined in § 1.892-3(a)(4)) for a foreign government's own account does not constitute commercial activity. Such transactions are not commercial activities regardless of whether they are effected by the foreign government through its employees or through a broker, commission agent, custodian, or other independent agent and regardless of whether or not any such employee or agent has discretionary authority to make decisions in effecting the transactions. Such transactions undertaken as a dealer (as determined under the principles of § 1.864-2(c)(2)(iv)(a)), however, constitute commercial activity. For purposes of this paragraph (c)(2), the term commodities means commodities of a kind customarily dealt in on an organized commodity exchange but only if the transaction is of a kind customarily consummated at such place.

  (3) Disposition of a U.S. real property interest. A disposition (including a deemed disposition under section 897(h)(1)) of a U.S. real property interest (as defined in section 897(c)), by itself, does not constitute the conduct of commercial activity. As described in § 1.892-3T(a), however, gain derived from a disposition of a U.S. real property interest defined in section 897(c)(1)(A)(i) will not qualify for exemption from tax under section 892.

  (4) Cultural events. For further guidance, see § 1.892-4T(c)(2).

  (5) Non-profit activities. For further guidance, see § 1.892-4T(c)(3).

  (6) Governmental functions. For further guidance, see § 1.892-4T(c)(4).

  (7) Purchasing. For further guidance, see § 1.892-4T(c)(5).

• Treas. Reg. §1.892-4(d)Applicability date. Show full text ▾ Collapse ▴

  Applicability date. Except as otherwise provided in this paragraph (d), this section applies to taxable years beginning on or after December 15, 2025. See § 1.892-4T, as contained in 26 CFR in part 1 in effect on April 1, 2025, for the rules that apply to taxable years beginning before December 15, 2025. A taxpayer may choose to apply this section to a taxable year beginning before December 15, 2025, if the period of limitations on assessment of the taxable year is open under section 6501 and the taxpayer and entities that are related (within the meaning of section 267(b) or section 707(b)) to the taxpayer apply this section and §§ 1.892-3(a)(4) and 1.892-5 in their entirety to the taxable year and all succeeding taxable years beginning before December 15, 2025.

• Treas. Reg. §1.892-4TCommercial activities (temporary regulations) Show full text ▾ Collapse ▴

  (a) Purpose. For further guidance, see § 1.892-4(a).

  (b) In general. For further guidance, see § 1.892-4(b).

  (c) Activities that are not commercial—(1) Investments—(i) In general. For further guidance, see § 1.892-4(c)(1)(i).

  (ii) Trading. For further guidance, see § 1.892-4(c)(2).

  (iii) Banking, financing, etc. Investments (including loans) made by a banking, financing, or similar business constitute commercial activities, even if the income derived from such investments is not considered to be income effectively connected to the active conduct of a banking, financing, or similar business in the U.S. by reason of the application of § 1.864-4(c)(5).

  (2) Cultural events. Performances and exhibitions within or outside the United States of amateur athletic events and events devoted to the promotion of the arts by cultural organizations are not commercial activities.

  (3) Non-profit activities. Activities that are not customarily attributable to or carried on by private enterprise for profit are not commercial activities. The fact that in some instances Federal, State, or local governments of the United States also are engaged in the same or similar activity does not mean necessarily that it is a non-profit activity. For example, even though the United States Government may be engaged in the activity of operating a railroad, operating a railroad is not a non-profit activity.

  (4) Governmental functions. Governmental functions are not commercial activities. The term “governmental functions” shall be determined under U.S. standards. In general, activities performed for the general public with respect to the common welfare or which relate to the administration of some phase of government will be considered governmental functions. For example, the operation of libraries, toll bridges, or local transportation services and activities substantially equivalent to the Federal Aviation Authority, Interstate Commerce Commission, or United States Postal Service will all be considered governmental functions for purposes of this section.

  (5) Purchasing. The mere purchasing of goods for the use of a foreign government is not a commercial activity.

• Treas. Reg. §1.892-4T(a)Purpose. Show full text ▾ Collapse ▴

  Purpose. For further guidance, see § 1.892-4(a).

• Treas. Reg. §1.892-4T(b)In general. Show full text ▾ Collapse ▴

  In general. For further guidance, see § 1.892-4(b).