Senate Finance Committee Chairman Max Baucus, D-Mont., and Sen. Charles Grassley, R-Iowa, the committees ranking Republican, want the congressional Joint Committee on Taxation to analyze how U.S. tax rules apply to sovereign wealth funds. The U.S. exempts passive income from U.S. investments made by foreign governments from taxation because of sovereign immunity and the desire to keep the U.S. economy open to foreign investment. In a letter to the joint panel, Messrs. Baucus and Grassley pointed to the rapid expansion and prominence of the funds. They cited the Federal Reserve Board in the letter, saying that the funds have invested more than $24 billion in U.S. financial services firms in recent months.
In light of the rapid increase in the size and number of SWFs, their U.S. investments and their expected continued growth, it is appropriate to examine the tax regime applicable to their U.S. investments and its policy underpinnings, according to the letter.
The two asked for the analysis to be completed by June 16.