Treasury and IRS Issue Proposed Regulations for Sovereign Investors, Offering Grandfathering and Transitional Relief

The Department of the Treasury and the Internal Revenue Service (IRS) issued additional guidance regarding proposed regulations under Section 892 of the Internal Revenue Code. These regulations, which exempt foreign governments and sovereign wealth funds from tax on certain passive U.S. investment income, now include grandfathering protection and transitional relief. This aims to provide certainty on the treatment of current investments and support existing and future sovereign wealth fund investment in the United States.