In this article, the author discusses a recent decision of the German Federal Tax Court wherein the Court addressed the applicability of treaty benefits under the 1989 Germany–US tax treaty and protocol to US S-Corporations and determined that such corporations must be granted the participation exemption under Art. 10(2)(a) of the treaty. The author further discusses whether or not the same may still apply following the entry into force of the 2006 protocol to the treaty.