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TITLE 26-INTERNAL REVENUE CODE § 893. Compensation of employees of foreign govern- ments or international organizations (a) Rule for exclusion Wages, fees, or salary of any dmployee of a foreign government or of an international orga- nization (including a consular or other officer, or a nondiplomatic representative), received as compensation for official services to such gov- ernment or international organization shall not be included in gross income and shall be exempt from taxation under this subtitle if- (1) such employee is not a citizen of the United States, or is a citizen of the Republic of the Philippines (whether or not a citizen of the United States); and (2) in the case of an emp:)yee of a foreign government, the services are of a character similar to those performed by employees of the Government of the United States in for- eign countries; and (3) in the case of an employee of a foreign government, the foreign government grants an equivalent exemption to employees of the Government of the United States performing similar services in such foreign country. (b) Certificate by Secretary of State The Secretary of State shall certify to the Secretary of the Treasury the names of the for- eign countries which grant an equivalent ex- emption to the employees of the Government of the United States performing services in such foreign countries, and the character of the services performed by employees of the Gov- ernment of the United States in foreign coun- tries. (Aug. 16, 1954, ch. 736, 68A Stat. 284.) § 894. Income affected by treaty (a) Income exempt under treaty Income of any kind, to the extent required by any treaty obligation of the United States, shall not be included in gross income and shall be exempt from taxation under this subtitle. (b) Permanent establishment in United States For purposes of applying any exemption from, or reduction of, any tax provided by any treaty to which the United States is a party with respect to income which is not effectively connected with the conduct of a trade or busi- ness within the United States, a nonresident alien individual or a foreign corporation shall be deemed not to have a permanent establish- ment in the United States at any time during the taxable year. This subsection shall not apply in respect of the tax computed under sec- tion 877(b). (Aug. 16, 1954, ch. 736, 68A Stat. 284; Nov. 13, 1966, Pub. L. 89-809, title I, § 105(a), 80 Stat. 1563.) AMENDMENTS 1966-Pub. L. 89-809 designated existing provisions as subsec. (a) added subsec. (b) and substituted "af- fected by treaty" for "exempt under treaty" in the section catchline. EFFECTIVE DATE OF 1966 AMENDMENT Section 105(d) of Pub. L. 89-809 provided that: "The amendments made by this section (other than subsec- tions (d) and (f)) [amending this section and adding section 896 of this title] shall apply with respect to taxable years beginning after December 31, 1966." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 643, 819 of this title. § 895. Income derived by a foreign central bank of issue from obligations of the United States or from bank deposits Income derived by a foreign central bank of issue from obligations of the United States or of any agency or instrumentality thereof (in- cluding beneficial interests, participations, and other instruments issued under section 302(c) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717)) which are owned by such foreign central bank of issue, or derived from interest on deposits with persons carrying on the banking business, shall not be included in gross income and shall be exempt from tax- ation under this subtitle unless such obligations or deposits are held for, or used in connection with, the conduct of commercial banking func- tions or other commercial activities. For pur- poses of the preceding sentence the Bank for International Settlements shall be treated as a foreign central bank of issue. (Added Pub. L. 87-29, § l(a), May 4, 1961, 75 Stat. 64, and amended Pub. L. 89-809, title I, § 102(a)(4)(A), Nov. 13, 1966, 80 Stat. 1543.) AMENDMENTS 1966-Pub. L. 89-809 exempted income derived from obligations of agencies or instrumentalities of the United States and income derived from interest on de- posits with persons carrying on the banking business, inserted parenthetical phrase "(including beneficial interests, participations, and other instruments issued under section 302(c) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717))," and insert- ed sentence requiring the Bank for International Set- tlements to be treated as a foreign central bank of issue. EFFECTIVE DATE OF 1966 AMENDMENT Amendment by Pub. L. 89-809 applicable with re- spect to taxable years beginning after Dec. 31, 1966, except that in applying section 864(c)(4)(B)(iD) of this title with respect to a binding contract entered into on or before Feb. 24, 1966, activities in the United States on or before such date in negotiating or carrying out such contract shall not be taken into account, see sec- tion 102(e)(1) of Pub. L. 89-809, set out as an Effective Date of 1966 Amendment note under section 861 of this title. EFFECTIVE DATE Section l(c) of Pub. L. 87-29 provided that: "The amendments made by subsections (a) and (b) [adding this section and amending analysis preceding section 891 of this title] shall be effective with respect to income received in taxable years beginning after De- cember 31, 1960." § 896. Adjustment of tax on nationals, residents, and corporations of certain foreign countries (a) Imposition of more burdensome taxes by foreign country Whenever the President finds that- (1) under the laws of any foreign country, considering the tax system of such foreign country, citizens of the United States not resi- dents of such foreign country or domestic cor- porations are being subjected to more burden- Page 573 § 896