Rev. Rul. 75-298

Advice has been requested concerning the applicability of sections 892, 893 and 4382 of the Internal Revenue Code of 1954 to certain organizations described below.

Section 892 of the Code provides, in part, that the income of foreign governments received from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign governments, or from interest on deposits in banks in the United States of monies belonging to such foreign governments, or from any other sources within the United States, shall not be included in gross income and shall be exempt from Federal income taxation.

Accordingly, income earned by a foreign bank that qualifies as a central bank of issue under section 895 of the Code, or by any other organization created by a foreign government, which does not engage in the United States in either commercial banking functions as described in section 1.864-4(c)(5)(i) of the Income Tax Regulations or in other commercial activities (on more than a de minimis basis in the United States), qualifies for the exemption from Federal income tax described in section 892, provided such bank or other organization meets the following requirements:

1. it is wholly owned and controlled by a foreign government;

2. its assets and income are derived solely from its activities and investments and from the foreign government;

3. its net income is credited either to itself or to the foreign government, with no portion of its income inuring to the benefit of any private person; and

4. its investments in the United States, if any, include only those which produce passive income, such as currencies, fixed interest deposits, stocks, bonds, and notes or other securities evidencing loans.

A request for a ruling in the described situations must be accompanied by a description of any activities and investments of the organization in the United States and by a certification from the foreign government that the organization meets the requirements of paragraphs 1, 2, 3 and 4, above.

The same tests will be applied for purposes of determining whether such organizations will be considered a "foreign government" within the meaning of sections 893 and 4382 of the Code.

Rev. Rul. 66-73, 1966-1 C.B. 174, is revoked.

Pursuant to the authority contained in section 7805(b) of the Code, to the extent this Revenue Ruling produces adverse tax effects, this Revenue Ruling will be applied without retroactive effect to income earned on or before June 26, 1975, the date of the announcement of this Revenue Ruling.

¹ Also released as TIR-1390, dated June 26, 1975.