Rev. Rul. 67-190

Advice has been requested whether acquisitions of certain participation certificates sold by the Export-Import Bank of Washington are subject to the interest equalization tax imposed by section 4911 of the Internal Revenue Code of 1954.

The Export-Import Bank of Washington is a corporate agency of the United States, organized and existing under the Export-Import Bank Act of 1945, as amended, 12 U.S.C. 635. In the course of its operations the Export-Import Bank of Washington has acquired and holds for its own account various evidences of indebtedness or beneficial interests therein which are primarily obligations of foreign borrowers.

With the prior approval of the Secretary of the Treasury, the Export-Import Bank of Washington establishes a portfolio consisting of certain of the above-mentioned obligations. Export-Import Bank of Washington then sells beneficial interests in such portfolio. Such interests are evidenced by participation certificates. The principal of, and interest on, the participation certificates are unconditionally guaranteed by the Export-Import Bank of Washington. The participation certificates do not give the holders thereof any right to enforce the obligations held in the porfolio. The Export-Import Bank of Washington has custody, control, and administration of the obligations in the portfolio, may add obligations to, or remove obligations from, the portfolio and may freely substitute obligations in the portfolio. Thus, the participation certificates do not represent a claim against any identifiable obligations in the portfolio. Further, the obligation of the Export-Import Bank of Washington to make payment of principal and interest on the participation certificates is not contingent upon the payment to the Export-Import Bank of Washington of principal and interest on any obligations in the portfolio.

Section 4911 of the Code provides, in relevant part, that the interest equalization tax shall be imposed on each acquisition by a United States person (as defined in section 4920(a)(4) of the Code) of the stock of a foreign issuer, or the debt obligation of a foreign obligor, if such debt obligation has a period remaining to maturity of one year or more.

The described participation certificates sold by the Export-Import Bank of Washington are not the debt obligations of a foreign issuer or obligor, and therefore, their acquisition by United States persons is not subject to the interest equalization tax.