[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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