Sovereign wealth funds (SWFs) are governmental investment
vehicles, often funded with foreign exchange assets, and managed
separately from the official reserves of a monetary
authority.1 They have recently attracted the attention
of Congress and the imagination of the public press.2
This attraction may be the result of several factors, including an
increase in commodity prices, growth in the size and public nature
of SWF investments, and the recent U.S. credit crunch. In any
event, Senators Baucus and Grassley of the Committee on Finance
have requested the Joint Committee on Taxation "[to] describe
and [to] analyze the history, current rules, and policy
underpinnings of the U.S. tax rules applicable to U.S. investment
by foreign governments, including investments made by Sovereign
Wealth Funds."3 They indicated that "we ought
to ... have a clear understanding of the U.S. tax rules that apply
to these investments, how those rules compare to those that apply
to
