The taxation of Sovereign Wealth Funds in the United States is outmoded and due for reconsideration. Offering a tax exemption to the billion dollar investment funds owned by foreign governments is both unfair and ineffective. Founded in the principles of sovereign immunity, the foreign sovereign tax exemption, codified in I.R.C. § 892, fails to satisfy the Congressional goals that motivated its creation. This Article explains the current taxation of foreign sovereigns and, by extension, Sovereign Wealth Funds. It then illustrates that the current exemption is simultaneously too broad, providing a tax exemption for activities that are clearly nongovernmental activities, and therefore outside of the realm of sovereign immunity, and too narrow, failing to provide a tax exemption for activities that clearly are governmental activities. Finally, this Article explains that any exemption provided to foreign sovereigns should be offered only as a treaty matter, reserving the privilege as a negotiation tool, and thereby ensuring that the United States receives similar benefits.