"IRS Proposes Regulations on Sovereign Investments"

On November 3, 2011, the Internal Revenue Service published proposed regulations (REG-146537-06) under Internal Revenue Code Section 892 refining the scope of tax-free investments in the United States by foreign governments.  Although generally taxpayer-friendly, the proposed regulations present both opportunity and peril. Any entity operating under the exemption provided by Section 892 should re-evaluate its activities in light of the service's newly proposed rules. The preamble to the proposed regulations states that taxpayers may rely on them before they are finalized.

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