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878. Foreign educational, charitable, and certain other exempt organizations For special provisions relating to foreign educational, charitable, and other exempt organizations, see sections 512(a) and 4948. 879. Tax treatment of certain community income in the case of nonresident alien individuals 881. Tax on income of foreign corporations not connected with United States business (a) Imposition of tax. -- Except as provided in subsection (c), there is hereby imposed for each taxable year a tax of 30 percent of the amount received from sources within the United states by a foreign corporation as -- (1) interest (other than original issue discount as defined in section 1273), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income, (2) gains described in section 631(b) or (c), (3) in the case of -- (A) a sale or exchange of an original issue discount obligation, the amount of the original issue discount accruing while such obligation was held by the foreign corporation (to the extent such discount was not theretofore taken into account under subparagraph (B)), and (B) a payment on an original issue discount obligation, an amount equal to the original issue discount accuring while such obligation was held by the foreign corporation (except that such original issue discount shall be taken into account under this subparagraph only to the extent such discount was not theretofore taken into account under this subparagraph and only to the extent that the tax thereon does not exceed the payment less the tax imposed by paragraph (1) thereon), and (4) gains from the sale or exchange after October 4, 1966, of patents, copyrights, secret processes and formulas, good will, trademarks, trade brands, franchises, and other like property, or of any interest in any such property, to the extent such gains are from payments which are contingent on the productivity, use, or dispostion of the property or interest sold or exchanged, but only to the extent the amount so received is not effectively connected with the conduct of a trade or business within the United States. (b) Exception for certain Guam and Virgin Islands corporations. -- (1) In general. -- For purposes of this section and section 884, a corporation created or organized in Guam, American Samoa, the Northern Mariana Islands, or the Virgin Islands or under the law of any such possession shall not be treated as a foreign corporation of any taxable year if -- (A) at all times during such taxable year less than 25 percent in value of the stock of such corporation is benefically owned (directly or indirectly) by foreign persons, (B) at least 65 percent of the gross income of such corporation is shown to the satisfaction of the Secretary to be effectively connected with the conduct of a trade or business in such a possession or the United States for the 3-year period ending with the close of the taxable year of such corporation (or for such part of such period as the corporation or any predecessor has been in existence), and (2) Definitions. -- (A) Foreign person. -- For purposes of paragraph (1), the term "foreign person" means any person other than -- (i) a United States person, or (ii) a person who would be a United States person if references to the United States in section 7701 included references to a possession of the United States. (B) Indirect ownership rules. -- For purposes of paragraph (1), the rules of section 318(a)(2) shall apply except that "5 percent" shall be substituted for "50 percent" in subparagraph (C) thereof. (c) Repeal of tax on interest of foreign corporations received from certain portfolio debt investments. -- (1) In general. -- In the case of any portfolio interest received by a foreign corporation from sources withint the United States, no tax shall be imposed under paragraph (1) or (3) of subsection (a). (2) Portfolio interest. -- For purposes of this subsection, the term "portfolio interest" means any interest (including original issue discount) which would be subject to tax under subsection (a) but for this subsection and which is described in any of the following subparagraphs: (A) Certain obligations which are not registered. -- Interest which is paid on any obligation which is described in section 871(h)(2)(A). (B) Certain registered obligations. -- Interest which is paid on an obligation -- (i) which is in registered form, and (ii) with respect to which the person who would otherwise be required to deduct and withhold tax from such interest under section 1442(a) receives a statement which meets the requirements of section 871(h)(4) that the beneficial owner of the obligation is not a United States person. (3) Portfolio interest shall not include interest received by certain persons. -- For purposes of this subsection, the term "portfolio interest" shall not include any portfolio interest which -- (A) except in the case of interest paid on an obligation of the United States, is received by a bank on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business, (B) is received by a 10-percent shareholder (within the meaning of section 871(h)(3)(B)), or (C) is received by a controlled foreign corporation from a related person (within the meaning of section 864(d)(4)). (4) Special rules for controlled foreign corporations.-- (A) In general. -- In the case of any portfolio interest received by a controlled foreign corporation, the following provisions shall not apply: (i) Subparagraph (A) of section 954(b)(3) (relating to exception where foreign base company income is less than 5 percent or $1,000,000). (ii) Paragraph (4) of section 954(b)(3) (relating to exception for certain income subject to high foreign taxes). (iii) Clause (i) of section 954(c)(3)(A) (relating to certain income received from related persons). (B) Controlled foreign corporation. -- For purposes of this subsection, the term "controlled foreign corproation" has the meaning given to such term by section 957(a). (5) Secretary may cease application of this subsection. -- Under rules similar to the rules of section 871(h)(5), the Secretary may provide that this subsection shall not apply to payments of interest described in section 871(h)(5). (6) Registered form. -- For purposes of this subsection, the term "registered form" has the meaning given such term by section 163(f). (d) Tax not to apply to certain interest and dividends. -- No tax shall be imposed under paragraph (1) or (3) of subsection (a) on any amount described in section 871(i)(2). (e) Cross reference. -- For doubling of tax on corporations of certain foreign countries, see section 891. For special rules for original issue discount, see section 871(g). 882. Tax on income of foreign corporations connected with United States business (a) Imposition of tax. -- (I) In general. -- A foreign corporation engaged in trade or business within the United States during the taxable year shall be taxable as provided in section 11, 55, 59A, or 1201(a) on its taxable income which is effectively connected with the conduct of a trade or business within the United States. (2) Determination of taxable income. -- In determining taxable income for purposes of paragraph (1), gross income includes only gross income which is effectively connected with the conduct of a trade or business within the United States. (3) [Cross reference. --] For special tax treatment of gain or loss from the dispostion by a foreign corporation of a United States real property interest, see section 897. (b) Gross income. -- In the case of a foreign corporation, except where the context clearly indicates otherwise, gross income includes only -- (1) gross income which is derived from sources within the United States and which is not effectively connected with the conduct of a trade or business within the United States, and (2) gross income which is effectively connected with the conduct of a trade or business within the United States. (c) Allowance of deductions and credits. -- (1) Allocation of deductions. -- (A) General rule. -- In the case of a foreign corporation, the deductions shall be allowed only for purposes of subsection (a) and (except as provided by subparagraph (B)) only if and to the extent that they are connected with income which is effectively connected with the conduct of a trade or business within the United States; and the proper apportionment and allocation of the deductions for this purpose shall be determined as provided in regulations prescribed by the Secretary. (B) Charitable contributions. -- The deduction for charitable contributions and gifts provided by section 170 shall be allowed whether or not connected with income which is effectively connected with the conduct of a trade or business within the United States. (2) Deductions and credits allowed only if return filed. -- A foreign corporation shall receive the benefit of the deductions and credits allowed to it in this subtitle only by filing or causing to be filed with the Secretary a true and accurate return, in the manner prescribed in subtitle F, including therein all the information whcih the Secretary may deem necessary for the calculation of such deductions and credits. The preceding sentence shall not apply for purposes of the tax imposed by section 541 (relating to personal holding compnay tax), and shall not be construed to deny the credit provided by section 33 for tax withheld at source or the credit provided by section 34 for certain uses of gasoline. (3) Foreign tax credit. -- Except as provided by section 906, foreign corporations shall not be allowed the credit against the tax for taxes of foreign countries and possessions of the United States allowed by section 901. (4) Cross reference. -- For rule that certain foreign taxes are not to be taken into account in determining deduction or credit, see section 906(b)(1). (d) Election to treat real property income as income connected with United States business. -- (1) In general. -- A foreign corporation which during the taxable year derives any income -- (A) from real property located in the United States, or from any interest in such real property, including (i) gains from the sale or exchange of real property or an interest therein, (ii) rents or royalties from mines, wells, or other natural deposits, and (iii) gains described in section 631(b) or (c), and (B) which, but for this subsection, would not be treated as income effectively connected with the conduct of a trade or business within the United States, may elect for such taxable year to treat all such income as income which is effectively connected with the conduct of a trade or business within the United States. In such case, such income shall be taxable as provided in subsection (a)(1) whether or not such corporation is engaged in trade or business within the United States during the taxable year. An election under this paragraph for any taxable year shall remain in effect for all subsequent taxable years, except that it may be revoked with the consent of the Secretary with respect to any taxable year. (2) Election after revocation, etc. -- Paragraphs (2) and (3) of section 871(d) shall apply in respect of elections under this subsection in the same manner and to the same extent as they apply in respect of elections under section 871(d). (e) Interest on United States obligations received by banks organized to possessions. -- In the case of a corporation created or organized in, or under the law of, a possession of the United States which is carrying on the banking business in a possession of the United States, interest on obligations of the United States which is not portfolio interest (as defined in section 881(c)(2)) shall -- (1) for purposes of this subpart, be treated as income which is effectively connected with the conduct of a trade or business within the United States, and (2) shall be taxable as provided in subsection (a)(1) whether or not such corporation is engaged in trade or business within the United States during the taxable year. (f) Returns of tax by agent. -- If any foreign corporation has no office or place of business in the United States, the return required under section 6012 shall be made by the agent. 883. Exclusions from gross income (a) Income of foreign corporations from ships and aircraft. -- The following items shall not be included in gross income of a foreign corporation, and shall be exempt from taxation under this subtitle: (1) Ships operated by certain foreign corporations. -- Gross income derived by a corporation organized in a foreign country from the international operation of a ship or ships if such foreign country grants an equivalent exemption to corporations organized in the United States. (2) Aircraft operated by certain foreign corporations. -- Gross income derived by a corporation organized in a foreign country from the international operation of aircraft if such foreign country grants an equivalent exemption to corporations organized in the United States. (3) Railroad rolling stock of foreign corporations. -- Earnings derived from payments by a common carrier for the use on a temporary basis (not expected to exceed a total of 90 days in any taxable year) of railroad rolling stock owned by a corporation of a foreign country which grants an equivalent exemption to corporations organized in the United States. (4) Speical rules. -- The rules of paragraphs (5), (6), and (7) of section 872(b) shall apply for purposes of this subsection. (5) Special rule for countries which tax on residence basis. -- For purposes of this busbection, there shall not be taken into accounty any failure of a foreign country to grant an exemption to a corporation organized in the United States if such corporation is subject to tax by such foreign country on a residence basis pursuant to provisions of foreign law which meets such standards (if any) as the Secretary may prescribe. (b) Earnings derived from communications satellite system. -- The earnings derived from the ownership or operation of a communications satellite system by a foreign entity designated by a foreign government to participate in such ownership or operation shall be exempt from taxation under this subtitle, if the United States, through its designated entity, participates in such system pursuant to the Communications Satellite Act of 1962 (47 U.S.C. 701 and following). (c) Treatment of certain foreign corporations. -- (1) In general. -- Paragraph (1) or (2) of subsection (a) (as the case may be) shall not apply to any foreign corporation if 50 percent or more of the value of the stock of such corporation is owned by individuals who are not residents of such foreign country or another foreign country meeting the requirements of such paragraph. (2) Treatment of controlled foreign corporations. -- Paragraph (1) shall not apply to any foreign corporation which is a controlled foreign corporation (as defined in section 957(a)). (3) Special rules for publicly traded corporations. -- (A) Exception. -- Paragraph (1) shall not apply to any corporation which is organized in a foreign country meeting the requirements of paragraph (1) or (2) of subsection (a) (as the case may be) and the stock of which is primarily and regularly traded on an established securities market in such foreign country, another foreign country meeting the requirements of such paragraph, or the United States. (B) Treatment of stock owned by publicly traded corporation. -- Any stock in another corporation which is owned (directly or indirectly) by a corporation meeting the requirements of subparagraph (A) shall be treated as owned by individuals who are residents of the foreign country in which the corporation meeting the requirements of subparagraph (A) is organized. (4) Stock ownership through entities. -- For purposes of paragraph (1), stock owned (directly or indirectly) by or for a corporation, partnership, trust, or estate shall be treated as being owned proportionately by its shareholders, partners, or beneficiaries. Stock considered to be owned by a person by reason of the application of the preceding sentence shall, for purposes of applying such sentence, be treated as actually owned by such person. 884. Branch profits tax (a) Imposition of tax. -- In addition to the tax imposed by section 882 for any taxable year, there is hereby imposed on any foreign corporation a tax equal to 30 percent of the dividend equivalent amount for the taxable year. (b) Dividend equibalent amount. -- For purposes of subsection (a), the term "dividend equivalent amount" means the foreign corporation's effectively connected earnings and profits for the taxable year adjusted as provided in this subsection: (1) Reduction for increase in U.S. net equity. -- If -- (A) the U.S. net equity of the foreign corporation as of the close of the taxable year, exceeds (B) the U.S. net equity of the foreign corporation as of the close of the preceding taxable year, the effectively connected earnings and profits for the taxable year shall be reduced (but not below zero) by the amount of such excess. (2) Increase for decrease in net equity.-- (A) In general. -- If -- (i) the U.S. net equity of the foreign corporation as of the close of the preceding taxable eyar, exceeds (ii) the U.S. net equity of the foreign corporation as the close of the taxable year, the effectively connected earnings and profits for the taxable year shall be increased by the amount of such excess. (B) Limitations. -- (i) In general. -- The increase under subparagraph (A) for any taxable year shall not exceed the accumulated effectively connected earnings and profits ads of the close of the preceding taxable year. (ii) Accumulated effectively connected earnings and profits, -- For purpose of clause (i), the term "accumulated effectively connected earnings and profits" means the excess of -- (I) the aggregate effectively connected earnings and profits for preceding taxable years beginning after December 31, 1986, over (II) the aggregate dividend equibalent amounts determined for such preceding taxable years. (c) U.S. net equity. -- For purposes of this section -- (1) In general. -- The term "U.S. net equity" means -- (A) U.S. assets, reduced (including below zero) by (b) U.S. liabilities. (2) U.S. assets and U.S. liabilities. -- For purposes of paragraph (1) -- (A) U.S. assets. -- The term "U.S. assets" means the money and aggregate adjusted bases of property of the foreign corporation treated as connected with the conduct of a trade or business in the Untied States under regulations prescribed by the Secretary. For purposes of the preceding sentence, the adjusted basis of any property shall be its adjusted basis for pruposes of computing earnings and profits. (B) U.S. liabilities. -- The term "U.S. liabilities" means the liabilities of the foreign corporation treated as connected with the conduct of a trade or business in the United States under regulations prescribed by the Secretary. (C) Regulations to be consistent with allocation of deductions. -- The regulations prescribed under subparagraphs (A) and (B) shall be consistent with the allocation of deductions under section 882(c)(1). (d) Effectively connected earnings and profits. -- For purposes of this section -- (1) In general. -- The term "effectively connected earnings and profits" means earnings and profits (without diminution by reason of any distributions made during the taxable year) which are attributable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business within the United States. (2) Exception for certain income. -- The term "effectively connected earnings and profits" shall not include any earnings and profits attributable to -- (A) income not includible in gross income under paragraph (1) or (2) of section 883(a), (B) income treated as effectively connected with the conduct of a trade or business within the United States under section 921(d) or 926(b), (C) gain on the disposition of a United States real property interest described in section 897(c)(1)(A)(ii), (D) income treated as effectively connected with the conduct of a trade or business within the United States under section 953(c)(3)(C), or (E) income treated as effectively connected with the conduct of a trade or business wihtin the United States under section 882(e). Property and liabilities of the foreign corporation treated as connected with such income under regulations prescribed by the Secretary shall not be taken into account in determining the U.S. assets or U.S. liabilities of the foreign corporation. (e) Coordination with income tax treaties; etc. -- (1) Limitation on treaty exemption. -- No treaty between the United States and a foreign country shall exempt any foreign corporation from the tax imposed by subsection (a) (or reduce the amount thereof) unless -- (A) such treaty is an income tax treaty, and (B) such foreign corporation is a qualified resident of such foreign country. (2) Treaty modividations. -- If a foreign corporation is a qualified resident of a foreign country with which the United States has an income tax treaty -- (A) the rate of tax under subsection (a) shall be the rate of tax specified in such treaty -- (i) on branch profits if so specified, or (ii) if not so specified, on dividend spaid by a domestic corporation to a corporation resident in such country which wholly owns such domestic corporation, and (B) any other limitations under such treaty on the tax imposed by subsection (a) shall apply. (3) Coordination with withholding tax. -- (A) In general. -- If a foreign corporation is subject to the tax imposed by subsection (a) for any taxable year (determined after the application of any treaty), no tax shall be imposed by section 871(a), 1441, or 1442 on any dividends paid by such corporation out of its earnings and profits for such taxable year. (B) Limitation on certain treaty benefits. -- If -- (i) any dividend described in section 861(a)(2)(B) is received by a foreign corporation, and (ii) subparagraph (A) does not apply to such dividend, rules similar to the rules of subparagraphs (A) and (B) of subsection (f)(3) shall apply to such dividend. (4) Qualified resident. -- For purposes of this subsection -- (A) In general. -- Except as otherwise provided in this paragraph, the term "qualified resident" means, with respect to any foreign country, any foreign corporation which is a resident of such foreign country unless -- (i) 50 percent or more (by value) of the stock of such foreign corporation is owned (within the meaning of section 883(c)(4)) by individuals who are not residents of such foreign country and who are not United States citizens or resident aliens, or (ii) 50 percent or more of its income is used (directly or indirectly) to meet liabilities to persons who are not residents of such foreign country or citizens or residents of the United States. (B) Special rule for publicly traded corporations. -- A foreign corporation which is a resident of a foreign country shall be treated as a qualified resident of such foreign country if -- (i) the stock of such corporation is primarily and regularly traded on an established securities market in such foreign country, or (ii) such corporation is holly onwed (either directly or indirectly) by another foreign corporation which is organized in such foreign country and the stock of which is so traded. (C) Corporations owned by publicly traded domestic corporations. -- A foreign corporation which is a resident of a foreing country shall be treated as a qualified resident of such foreign country if -- (i) such corporation is wholly owned (directly or indirectly) by a domestic corporation, and (ii) the stock of such domestic corporation is primarily and regularly traded on an established securities market in the United States. (D) Secretarial authority. -- The Secretary may, in his sole discretion, treat a foreign corporation as being a qualified, resident of a foreign country if such corporation establishes to the satisfaction of the Secretary that such corporation meets such requirements as the Secretary may establish to ensure that individuals who are not resdients of such foreing country do not use the treaty between such foreign country and the United States in a manner inconsistent with the purposes of this subsection. (5) Exception for international organizations. -- This section shall not apply to an international organization (as defined in section 7701(a)(18)). (f) Treatment of interest allocable to effectively connected income. -- (1) In general. -- In the case of a foreign corporation engaged in a trade or business in the United States (or having gross income treated as effectively connected with the conduct of a trade or business in the United States), for purposes of this subtitle -- (A) any interestpaid by such trade or business in the United States shall be treated as if it were paid by a domestic corporation, and (B) to the extent the amount of interest allowable as a deduction under section 882 in computing the effectively connected taxable income of such foreing corporation exceeds the interest described in subparagraph (A), such foreign corporation shall be liable for tax under section 881(a) in the same manner as if such excess were interest paid to such foreign corporation by a wholly owned domestic corporation on the last day of such foreign corporation's taxable year. To the extent provided in regulations, subparagraph (A) shall not apply to interst in excess of the amounts reasonably expected to be deductible under section 882 in computing the effectively connected taxable income of such foreign corporation. (2) Effectively connected taxable income. -- For purposes of this subsection the term "effectively connected taxable income" means taxable income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business within the United States. (3) Coordination with treaties. -- (A) Payor must be qualified resident. -- In the case of any interest described in paragraph (1) which is paid or accrued by a foreign corporation, no benefit under any treaty between the United States and the foreign country of which such corporation is a resident shall apply unless -- (i) such treaty is an income tax treaty, and (ii) such foreign corporation is a qualified resident of such foreign country. (B) Recipient must be qualified resident. -- In the case of any interest describedin paragraph (1) which is received or accrued by any corporation, no benefit under any treaty between the United States and the foreign country of which such corporation is a resident shall apply unless -- (i) such treaty is an income tax treaty, and (ii) such foreign corporation is a qualified resident of such foreign country. (g) Regulations. -- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations providing for appropriate adjustments in the detemrination of the dividend equivalent amount in connection with the distribution to shareholders or transfer to a controlled corporation of the taxpayer's U.S. assets and other adjustments in such determination as are necessary or appropriate to carry out the purposes of this section. 885. Cross references (1) For special provisions relating to foreign corporations carrying on an insurance business within the United States, see section 842. (2) For rules applicable in determining whether any foreign corproation is engaged in trade or business within the United States, see section 864(b). (3) For adjustment of tax in case of corporations of certain foregin countries, see section 896. (4) For allowance of credit against the tax in case of a foreign corproation having income effectively connected with the conduct of a trade or business within the United States, see section 906. (5) For withholding at source of tax on income of foreign corporations, see section 1442. 887. Imposition of tax on gross transportation income of nonresident aliens and foreign corporations (a) imposition of tax. -- In the case of any nonresident alien individual or foreign corporation, there is hereby imposed for each taxable year a tax equal to 4 percent of such individual's or corporation's United States source gross transportation income for such taxable year. (b) United States source gross transportation income. -- (1) In general. -- Except as provided in paragraphs (2) and (3), the term "United States source gross transportation income" means any gross income which is transportation income (as defined in section 863(c)(3)) to the extent such income is treated as from sources in the United States under section 863(c)(2). To the extent provided in regulations, such term does not include any income of a kind to which an exemption under paragraph (1) or (2) of section 883(a) would not apply. (2) Exception for certain income effectively connected with business in the United States. -- The term "United States source gross transportation income shall not include any income taxable under section 871(b) or 882. (3) Exception for certain income taxable in possessions. -- The term "United States source gross transporation income" does not include any income taxable in a possession of the United States under the provisions of this title as made applicable in such possession. (4) Determination of effectively connected income. -- For purposes of this chapter, United States source gross transportation income of any taxpayer shall not be treated as effectively connected with the conduct of a trade or business in the United States unless -- (A) the taxpayer has a fixed place of business in the United States involved in the earning of United States source gross transportation income, and (B) substantially all of the United States source gross transportation income (determined without regard to paragraph (2) of the taxpayer is attributable to regularly scheduled transportation (or, in the case of income from the leasing of a vessel or aircraft, is attributable to a fixed place of business in the United States). (c) Coordination with other provisions. -- Any income taxable under this section shall not be taxable under section 871, 881, or 882. 891. Doubling of rates of tax on citizens and corporations of certain foreign countries Whenever the President finds that, under the laws of any foreign country, citizens or corporations of the United States are being subjected to discriminatory or extraterritorial taxes, the President shall so proclaim and the rates of tax imposed by sections 1, 3, 11, 801, 831, 852, 871, and 881 shall, for the taxalbe year during which such proclamatin is made and for each taxable year thereafter, be doubled in the case of each citizena and corporation of such foreign country; but the tax at such dobuled rate shall be considered as imposed by such sections as the case may be. In no case shall this section operate to increase the taxes imposed by such sections (computed without regard to this section) to an amount in excess of 80 percent of the taxable income of the taxpayer (computed without regard to the deductions allowble under section 151 and under part VIII of subchapter B). Whenever the President finds that the laws of any foreign country with respect to which the President has made a proclamation under the preceding provisions of this section have been modivided so that discriminatory and extraterritorial taxes applicable to citizens and corporations of the United States have been removed, he shall so proclaim, and the provisions of this section providing for doubled rates of tax shall not apply to any citizen or corporation of such foreign country with respect to any taxable year beginning after such proclamation is made. 892. Income of foreign governments and of internationa organizations (a) Foreign governments. -- (1) In general. -- The income of foreign governments received rom -- (A) investments in the United States in -- (i) stocks, bonds, or other domestic securities owned by such foreign governments, or (ii) financial instruments held in the execution of governmental financial or monetary policy, or (B) interest on deposits in banks in the United States of moneys belonging to such foreign governments, shall not be included in gross income and shall be exempt from taxation under this subtitle. (2) Income received directly or indirectly from commercial activities. -- (A) In general. -- Paragraph (1) shall not apply to any income -- (i) derived from the conduct of any commercial activity (whether within or outside the United States), (ii) received by a controlled commercial entity or received (directly or indirectly) from a controlled commercial entity. (iii) derived from the disposition of any interest in a controlled commercial entity. (B) Controlled commercial entity. -- For purposes of subparagraph (A), the term "controlled commercial entity" means any entity engaged in commercial activities (whether within or outside the United States) if the government -- (i) holds (directly or indirectly) any interest in such entity which (by value or voting interest) is 50 percent or more of the total of such interests in such entity, or (ii) holds (directly or indirectly) any other interest in such entity which provides the foreign government with effective control of such entity. For purposes of the preceding sentence, a central bank of issue shall be treated as a controlled commercial entity only if engaged in commercial activities within the United Staes. (3) Treament as resident. -- For purposes of this title, a foreign government shall be treated as a corporate residnet of its country. A foreign government shall be so treated for purposes of any income tax treaty obligations of the United Stats if such government grants equivalent treatment to the Government of the United States. (b) International organizations. -- The income of international organizations received from investments in the United States in stocks, bonds, or other domestic securities owned by such international organizattions, or from interest on deposits in banks in the United Staes of moneys belonging to such inernational organizations, or from any other source within the United States, shall not be included in gross income and shall be exempt from taxation under this substitle. (c) Regulations. -- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.