The U.S. Internal Revenue Service (IRS) has proposed changes to Section 892 of the tax code that would eliminate tax exemptions for certain sovereign wealth fund (SWF) investments. The proposal aims to classify specific direct investment activities, such as direct lending, debt restructuring, and co-investment, as "commercial activities," making them taxable. This change could impact existing investment projects and may push SWFs towards more passive investment strategies. The IRS has opened a comment period on this proposal, which will close on February 13th.