[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2518 Introduced in Senate (IS)]
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118th CONGRESS
1st Session
S. 2518
To amend the Internal Revenue Code of 1986 to make investment income of
certain foreign governments subject to tax.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 26, 2023
Mr. Wyden introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to make investment income of
certain foreign governments subject to tax.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Ending Tax Breaks for Massive
Sovereign Wealth Funds Act''.
SEC. 2. INVESTMENT INCOME OF CERTAIN FOREIGN GOVERNMENTS SUBJECT TO
TAX.
(a) In General.--Section 892(a) of the Internal Revenue Code of
1986 is amended by adding at the end the following new paragraph:
``(4) Investment income of non-exempt foreign
governments.--
``(A) In general.--Paragraph (1)(A)(i) shall not
apply to income from investments of a non-exempt
foreign government.
``(B) Non-exempt foreign government.--For purposes
of this paragraph, the term `non-exempt foreign
government' means any foreign government which--
``(i) holds, directly or indirectly, more
than $100,000,000,000 in assets for investment
or for the production of income, and
``(ii) either--
``(I) does not have a free trade
agreement in effect with the United
States or an income tax treaty or
convention in effect with the United
States, or
``(II) is a foreign government of a
covered nation (as defined in section
4872(d)(2) of title 10, United States
Code).''.
(b) Regulations.--Section 892(c) of the Internal Revenue Code of
1986 is amended by inserting before the period at the end the following
``, including--
``(1) regulations to prevent the avoidance of the purposes
of subsection (a)(4), and
``(2) regulations relating to the types of assets taken
into account under subsection (a)(4)(B)(i).''.
(c) Publication of List of Non-Exempt Foreign Governments.--
(1) In general.--Not later than December 31, 2024, the
Secretary of the Treasury (or the Secretary's delegate) shall
publish a list of foreign governments which are non-exempt
foreign governments (as defined in section 892(a)(4) of the
Internal Revenue Code of 1986, as added by this section).
(2) Updating.--The Secretary of the Treasury (or the
Secretary's delegate) shall regularly update the list published
under paragraph (1).
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to income received
after December 31, 2023.
(2) Delay in application for income on qualified
investments.--In the case of any qualified investment, the
amendments made by this section shall apply to income received
from such investment after December 31, 2025.
(3) Qualified investment.--For purposes of paragraph (2)--
(A) In general.--The term ``qualified investment''
means, with respect to a non-exempt foreign government,
any investment made by such government on or before the
date of the enactment of this Act the income from which
would (without regard to the amendments made by this
Act) be excluded from the gross income of such
government under section 892 of the Internal Revenue
Code of 1986.
(B) Certain later investments treated as qualified
investments.--In the case of an investment made by a
non-exempt foreign government which would be treated as
a qualified investment of such government but for the
fact it was made after the date of the enactment of
this Act and before January 1, 2026, such investment
shall be treated as a qualified investment if it--
(i) was made pursuant to a binding contract
which--
(I) was in effect on such date of
enactment and at all times thereafter
before such investment,
(II) required such investment to be
made on a fixed date and in a fixed
amount, and
(III) did not allow any person to
delay, deny, or excuse such investment,
or
(ii) is a qualified public investment.
(C) Termination of qualified investment
treatment.--
(i) In general.--If--
(I) a domestic corporation of which
a non-exempt foreign government is a
direct shareholder and which has
received 1 or more qualified
investments, or
(II) a domestic or foreign
partnership (or similar flow-through
entity) in which a non-exempt foreign
government is a direct partner and
which has made 1 or more qualified
investments on behalf of a non-exempt
foreign government,
receives an additional investment (which is
not a qualified investment) from any non-exempt
foreign government, then, notwithstanding
paragraph (2), the amendments made by this
section shall apply to income received from all
the qualified investments received by the non-
exempt foreign government from such domestic
corporation or through such partnership (or
similar flow-through entity) after the date on
which such domestic corporation or partnership
(or similar flow-through entity) receives such
additional investment.
(ii) Determination of receipt.--For
purposes of this subparagraph, an entity
described in subclause (I) or (II) of clause
(i) shall be treated as having received an
additional investment from a non-exempt foreign
government if--
(I) it receives such investment
directly from such government, or
(II) it receives such investment
from a partnership (or similar flow-
through entity) of which such
government is a direct or indirect
partner.
(iii) Certification.--For purposes of this
subparagraph, an entity shall be treated as
having received additional investments
described in clause (i) unless, at the time of
making payments of income on any qualified
investment, such entity certifies (in such
manner as the Secretary of the Treasury or his
delegate may prescribe) that no such additional
investments have been received as of such time.
(D) Qualified public investment.--For purposes of
subparagraph (B)(ii)--
(i) In general.--The term ``qualified
public investment'' means any investment by a
non-exempt foreign government in a domestic
corporation or a domestic or foreign
partnership which is regularly traded on an
established securities market.
(ii) Exception.--Such term shall not
include--
(I) any investment in a domestic
corporation on or after the date on
which such non-exempt foreign
government holds (directly or
indirectly) 10 percent or more (by vote
or value) of the total outstanding
shares of stock in such domestic
corporation, and
(II) any investment in a domestic
or foreign partnership on or after the
date on which such non-exempt foreign
government holds (directly or
indirectly) 10 percent or more of the
capital or profits interests of such
domestic partnership.
(E) Other terms.--For purposes of this paragraph--
(i) Non-exempt foreign government.--The
term ``non-exempt foreign government'' has the
meaning given such term under section 892(a)(4)
of the Internal Revenue Code of 1986 (as added
by this section).
(ii) Investment.--The term ``investment''
means an investment described in section
892(a)(1)(A)(i) of the Internal Revenue Code of
1986.
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