[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4337 Enrolled Bill (ENR)]
H.R.4337
One Hundred Eleventh Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Tuesday,
the fifth day of January, two thousand and ten
An Act
To amend the Internal Revenue Code of 1986 to modify certain rules
applicable to regulated investment companies, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

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(a) Short Title.--This Act may be cited as the ``Regulated
Investment Company Modernization Act of 2010''.
(b) Reference.--Except as otherwise expressly provided, whenever in
this Act an amendment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference shall be
considered to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act is as
follows:

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976ed2fc55567a829aa7788d42afe38f1d968c6553531fe2cb1a6166e43fd2c4

TITLE I

-CAPITAL LOSS CARRYOVERS OF REGULATED INVESTMENT COMPANIES

companies to satisfy gross income and asset tests.
DISTRIBUTIONS

40f2314971d52fcf693a369272bd7c397004d72b18b9d3d935dc7769a91fb36e

TITLE II

-MODIFICATION OF GROSS INCOME AND ASSET TESTS OF REGULATED

allocation rules for regulated investment companies.

0a36de2e0bbb0ef1cec813b5fe70376c5e22432732c7acfd1219cbfa2384a30e

TITLE III

-MODIFICATION OF RULES RELATED TO DIVIDENDS AND OTHER

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27397a486250d3e1fea6448f273d4ed4ddc2fc16f4711fb03286170fb9e68036

84c6af221724dd956d22a1acb20af3cbecf04e6a00af2219d1ee714fbabd1556

2edb98734db6229bf995485dee36086d8bd7d1381ba227404ddb6dcc8a08180b

4f2b3bc2c60bf2ad3e10ef7a11d04723dac645f4e0ae319efe7a080730411147

declared exempt-interest dividends.
INVESTMENT COMPANIES

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2c7f6a65f201f9cc43ff459ebfe19f9c57c37ecbf094685d5731c4f1a095f0e5

TITLE IV

-MODIFICATIONS RELATED TO EXCISE TAX APPLICABLE TO REGULATED

65dad811cf161e213c152b768b5c04ea1b19fca2f102bafb9a19254bad302701

of taxes paid by regulated investment company.

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588524eca54064dae1179ea89caab638742f91b70f933e3f7323131521c6183e

TITLE V

-OTHER PROVISIONS

COMPANIES.
(a) In General.--Subsection (a) of section 1212 is amended by
redesignating paragraph (3) as paragraph (4) and by inserting after
paragraph (2) the following new paragraph:
``(3) Regulated investment companies.--
``(A) In general.--If a regulated investment company has a
net capital loss for any taxable year--
``(i) paragraph (1) shall not apply to such loss,
``(ii) the excess of the net short-term capital loss
over the net long-term capital gain for such year shall be
a short-term capital loss arising on the first day of the
next taxable year, and
``(iii) the excess of the net long-term capital loss
over the net short-term capital gain for such year shall be
a long-term capital loss arising on the first day of the
next taxable year.
``(B) Coordination with general rule.--If a net capital
loss to which paragraph (1) applies is carried over to a
taxable year of a regulated investment company--
``(i) Losses to which this paragraph applies.--Clauses
(ii) and (iii) of subparagraph (A) shall be applied without
regard to any amount treated as a short-term capital loss
under paragraph (1).
``(ii) Losses to which general rule applies.--Paragraph
(1) shall be applied by substituting `net capital loss for
the loss year or any taxable year thereafter (other than a
net capital loss to which paragraph (3)(A) applies)' for
`net capital loss for the loss year or any taxable year
thereafter'.''.
(b) Conforming Amendments.--
(1) Subparagraph (C) of section 1212(a)(1) is amended to read
as follows:
``(C) a capital loss carryover to each of the 10 taxable
years succeeding the loss year, but only to the extent such
loss is attributable to a foreign expropriation loss,''.
(2) Paragraph (10) of section 1222 is amended by striking
``section 1212'' and inserting ``section 1212(a)(1)''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to net capital losses
for taxable years beginning after the date of the enactment of this
Act.
(2) Coordination rules.--Subparagraph (B) of section 1212(a)(3)
of the Internal Revenue Code of 1986, as added by this section,
shall apply to taxable years beginning after the date of the
enactment of this Act.
INVESTMENT COMPANIES

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COMPANIES TO SATISFY GROSS INCOME AND ASSET TESTS.
(a) Asset Test.--Subsection (d) of section 851 is amended--
(1) by striking ``A corporation which meets'' and inserting the
following:
``(1) In general.--A corporation which meets'', and
(2) by adding at the end the following new paragraph:
``(2) Special rules regarding failure to satisfy
requirements.--If paragraph (1) does not preserve a corporation's
status as a regulated investment company for any particular
quarter--
``(A) In general.--A corporation that fails to meet the
requirements of subsection (b)(3) (other than a failure
described in subparagraph (B)(i)) for such quarter shall
nevertheless be considered to have satisfied the requirements
of such subsection for such quarter if--
``(i) following the corporation's identification of the
failure to satisfy the requirements of such subsection for
such quarter, a description of each asset that causes the
corporation to fail to satisfy the requirements of such
subsection at the close of such quarter is set forth in a
schedule for such quarter filed in the manner provided by
the Secretary,
``(ii) the failure to meet the requirements of such
subsection for such quarter is due to reasonable cause and
not due to willful neglect, and
``(iii)(I) the corporation disposes of the assets set
forth on the schedule specified in clause (i) within 6
months after the last day of the quarter in which the
corporation's identification of the failure to satisfy the
requirements of such subsection occurred or such other time
period prescribed by the Secretary and in the manner
prescribed by the Secretary, or
``(II) the requirements of such subsection are
otherwise met within the time period specified in subclause
(I).
``(B) Rule for certain de minimis failures.--A corporation
that fails to meet the requirements of subsection (b)(3) for
such quarter shall nevertheless be considered to have satisfied
the requirements of such subsection for such quarter if--
``(i) such failure is due to the ownership of assets
the total value of which does not exceed the lesser of--
``(I) 1 percent of the total value of the
corporation's assets at the end of the quarter for
which such measurement is done, or
``(II) $10,000,000, and
``(ii)(I) the corporation, following the identification
of such failure, disposes of assets in order to meet the
requirements of such subsection within 6 months after the
last day of the quarter in which the corporation's
identification of the failure to satisfy the requirements
of such subsection occurred or such other time period
prescribed by the Secretary and in the manner prescribed by
the Secretary, or
``(II) the requirements of such subsection are
otherwise met within the time period specified in subclause
(I).
``(C) Tax.--
``(i) Tax imposed.--If subparagraph (A) applies to a
corporation for any quarter, there is hereby imposed on
such corporation a tax in an amount equal to the greater
of--
``(I) $50,000, or
``(II) the amount determined (pursuant to
regulations promulgated by the Secretary) by
multiplying the net income generated by the assets
described in the schedule specified in subparagraph
(A)(i) for the period specified in clause (ii) by the
highest rate of tax specified in section 11.
``(ii) Period.--For purposes of clause (i)(II), the
period described in this clause is the period beginning on
the first date that the failure to satisfy the requirements
of subsection (b)(3) occurs as a result of the ownership of
such assets and ending on the earlier of the date on which
the corporation disposes of such assets or the end of the
first quarter when there is no longer a failure to satisfy
such subsection.
``(iii) Administrative provisions.--For purposes of
subtitle F, a tax imposed by this subparagraph shall be
treated as an excise tax with respect to which the
deficiency procedures of such subtitle apply.''.
(b) Gross Income Test.--Section 851 is amended by adding at the end
the following new subsection:
``(i) Failure To Satisfy Gross Income Test.--
``(1) Disclosure requirement.--A corporation that fails to meet
the requirement of paragraph (2) of subsection (b) for any taxable
year shall nevertheless be considered to have satisfied the
requirement of such paragraph for such taxable year if--
``(A) following the corporation's identification of the
failure to meet such requirement for such taxable year, a
description of each item of its gross income described in such
paragraph is set forth in a schedule for such taxable year
filed in the manner provided by the Secretary, and
``(B) the failure to meet such requirement is due to
reasonable cause and not due to willful neglect.
``(2) Imposition of tax on failures.--If paragraph (1) applies
to a regulated investment company for any taxable year, there is
hereby imposed on such company a tax in an amount equal to the
excess of--
``(A) the gross income of such company which is not derived
from sources referred to in subsection (b)(2), over
``(B) \1/9\ of the gross income of such company which is
derived from such sources.''.
(c) Deduction of Taxes Paid From Investment Company Taxable
Income.--Paragraph (2) of section 852(b) is amended by adding at the
end the following new subparagraph:
``(G) There shall be deducted an amount equal to the tax
imposed by subsections (d)(2) and (i) of section 851 for the
taxable year.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years with respect to which the due date (determined
with regard to any extensions) of the return of tax for such taxable
year is after the date of the enactment of this Act.
DISTRIBUTIONS

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ALLOCATION RULES FOR REGULATED INVESTMENT COMPANIES.
(a) Capital Gain Dividends.--
(1) In general.--Subparagraph (C) of section 852(b)(3) is
amended to read as follows:
``(C) Definition of capital gain dividend.--For purposes of
this part--
``(i) In general.--Except as provided in clause (ii), a
capital gain dividend is any dividend, or part thereof,
which is reported by the company as a capital gain dividend
in written statements furnished to its shareholders.
``(ii) Excess reported amounts.--If the aggregate
reported amount with respect to the company for any taxable
year exceeds the net capital gain of the company for such
taxable year, a capital gain dividend is the excess of--
``(I) the reported capital gain dividend amount,
over
``(II) the excess reported amount which is
allocable to such reported capital gain dividend
amount.
``(iii) Allocation of excess reported amount.--
``(I) In general.--Except as provided in subclause
(II), the excess reported amount (if any) which is
allocable to the reported capital gain dividend amount
is that portion of the excess reported amount which
bears the same ratio to the excess reported amount as
the reported capital gain dividend amount bears to the
aggregate reported amount.
``(II) Special rule for noncalendar year
taxpayers.--In the case of any taxable year which does
not begin and end in the same calendar year, if the
post-December reported amount equals or exceeds the
excess reported amount for such taxable year, subclause
(I) shall be applied by substituting `post-December
reported amount' for `aggregate reported amount' and no
excess reported amount shall be allocated to any
dividend paid on or before December 31 of such taxable
year.
``(iv) Definitions.--For purposes of this
subparagraph--
``(I) Reported capital gain dividend amount.--The
term `reported capital gain dividend amount' means the
amount reported to its shareholders under clause (i) as
a capital gain dividend.
``(II) Excess reported amount.--The term `excess
reported amount' means the excess of the aggregate
reported amount over the net capital gain of the
company for the taxable year.
``(III) Aggregate reported amount.--The term
`aggregate reported amount' means the aggregate amount
of dividends reported by the company under clause (i)
as capital gain dividends for the taxable year
(including capital gain dividends paid after the close
of the taxable year described in section 855).
``(IV) Post-december reported amount.--The term
`post-December reported amount' means the aggregate
reported amount determined by taking into account only
dividends paid after December 31 of the taxable year.
``(v) Adjustment for determinations.--If there is an
increase in the excess described in subparagraph (A) for
the taxable year which results from a determination (as
defined in section 860(e)), the company may, subject to the
limitations of this subparagraph, increase the amount of
capital gain dividends reported under clause (i).
``(vi) Special rule for losses late in the calendar
year.--For special rule for certain losses after October
31, see paragraph (8).''.
(2) Conforming amendment.--Subparagraph (B) of section
860(f)(2) is amended by inserting ``or reported (as the case may
be)'' after ``designated''.
(b) Exempt-Interest Dividends.--Subparagraph (A) of section
852(b)(5) is amended to read as follows:
``(A) Definition of exempt-interest dividend.--
``(i) In general.--Except as provided in clause (ii),
an exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by a regulated
investment company and reported by the company as an
exempt-interest dividend in written statements furnished to
its shareholders.
``(ii) Excess reported amounts.--If the aggregate
reported amount with respect to the company for any taxable
year exceeds the exempt interest of the company for such
taxable year, an exempt-interest dividend is the excess
of--
``(I) the reported exempt-interest dividend amount,
over
``(II) the excess reported amount which is
allocable to such reported exempt-interest dividend
amount.
``(iii) Allocation of excess reported amount.--
``(I) In general.--Except as provided in subclause
(II), the excess reported amount (if any) which is
allocable to the reported exempt-interest dividend
amount is that portion of the excess reported amount
which bears the same ratio to the excess reported
amount as the reported exempt-interest dividend amount
bears to the aggregate reported amount.
``(II) Special rule for noncalendar year
taxpayers.--In the case of any taxable year which does
not begin and end in the same calendar year, if the
post-December reported amount equals or exceeds the
excess reported amount for such taxable year, subclause
(I) shall be applied by substituting `post-December
reported amount' for `aggregate reported amount' and no
excess reported amount shall be allocated to any
dividend paid on or before December 31 of such taxable
year.
``(iv) Definitions.--For purposes of this
subparagraph--
``(I) Reported exempt-interest dividend amount.--
The term `reported exempt-interest dividend amount'
means the amount reported to its shareholders under
clause (i) as an exempt-interest dividend.
``(II) Excess reported amount.--The term `excess
reported amount' means the excess of the aggregate
reported amount over the exempt interest of the company
for the taxable year.
``(III) Aggregate reported amount.--The term
`aggregate reported amount' means the aggregate amount
of dividends reported by the company under clause (i)
as exempt-interest dividends for the taxable year
(including exempt-interest dividends paid after the
close of the taxable year described in section 855).
``(IV) Post-december reported amount.--The term
`post-December reported amount' means the aggregate
reported amount determined by taking into account only
dividends paid after December 31 of the taxable year.
``(V) Exempt interest.--The term `exempt interest'
means, with respect to any regulated investment
company, the excess of the amount of interest
excludable from gross income under section 103(a) over
the amounts disallowed as deductions under sections 265
and 171(a)(2).''.
(c) Foreign Tax Credits.--
(1) In general.--Subsection (c) of section 853 is amended--
(A) by striking ``so designated by the company in a written
notice mailed to its shareholders not later than 60 days after
the close of the taxable year'' and inserting ``so reported by
the company in a written statement furnished to such
shareholder'', and
(B) by striking ``Notice'' in the heading and inserting
``Statements''.
(2) Conforming amendments.--Subsection (d) of section 853 is
amended--
(A) by striking ``and the notice to shareholders required
by subsection (c)'' in the text thereof, and
(B) by striking ``and Notifying Shareholders'' in the
heading thereof.
(d) Credits for Tax Credit Bonds.--
(1) In general.--Subsection (c) of section 853A is amended--
(A) by striking ``so designated by the regulated investment
company in a written notice mailed to its shareholders not
later than 60 days after the close of its taxable year'' and
inserting ``so reported by the regulated investment company in
a written statement furnished to such shareholder'', and
(B) by striking ``Notice'' in the heading and inserting
``Statements''.
(2) Conforming amendments.--Subsection (d) of section 853A is
amended--
(A) by striking ``and the notice to shareholders required
by subsection (c)'' in the text thereof, and
(B) by striking ``and Notifying Shareholders'' in the
heading thereof.
(e) Dividend Received Deduction, etc.--
(1) In general.--Paragraph (1) of section 854(b) is amended--
(A) by striking ``designated under this subparagraph by the
regulated investment company'' in subparagraph (A) and
inserting ``reported by the regulated investment company as
eligible for such deduction in written statements furnished to
its shareholders'',
(B) by striking ``designated by the regulated investment
company'' in subparagraph (B)(i) and inserting ``reported by
the regulated investment company as qualified dividend income
in written statements furnished to its shareholders'',
(C) by striking ``designated'' in subparagraph (C)(i) and
inserting ``reported'', and
(D) by striking ``designated'' in subparagraph (C)(ii) and
inserting ``reported''.
(2) Conforming amendments.--Subsection (b) of section 854 is
amended by striking paragraph (2) and by redesignating paragraphs
(3), (4), and (5), as paragraphs (2), (3), and (4), respectively.
(f) Dividends Paid to Certain Foreign Persons.--
(1) Interest-related dividends.--Subparagraph (C) of section
871(k)(1) is amended by striking all that precedes ``any taxable
year of the company beginning'' and inserting the following:
``(C) Interest-related dividend.--For purposes of this
paragraph--
``(i) In general.--Except as provided in clause (ii),
an interest related dividend is any dividend, or part
thereof, which is reported by the company as an interest
related dividend in written statements furnished to its
shareholders.
``(ii) Excess reported amounts.--If the aggregate
reported amount with respect to the company for any taxable
year exceeds the qualified net interest income of the
company for such taxable year, an interest related dividend
is the excess of--
``(I) the reported interest related dividend
amount, over
``(II) the excess reported amount which is
allocable to such reported interest related dividend
amount.
``(iii) Allocation of excess reported amount.--
``(I) In general.--Except as provided in subclause
(II), the excess reported amount (if any) which is
allocable to the reported interest related dividend
amount is that portion of the excess reported amount
which bears the same ratio to the excess reported
amount as the reported interest related dividend amount
bears to the aggregate reported amount.
``(II) Special rule for noncalendar year
taxpayers.--In the case of any taxable year which does
not begin and end in the same calendar year, if the
post-December reported amount equals or exceeds the
excess reported amount for such taxable year, subclause
(I) shall be applied by substituting `post-December
reported amount' for `aggregate reported amount' and no
excess reported amount shall be allocated to any
dividend paid on or before December 31 of such taxable
year.
``(iv) Definitions.--For purposes of this
subparagraph--
``(I) Reported interest related dividend amount.--
The term `reported interest related dividend amount'
means the amount reported to its shareholders under
clause (i) as an interest related dividend.
``(II) Excess reported amount.--The term `excess
reported amount' means the excess of the aggregate
reported amount over the qualified net interest income
of the company for the taxable year.
``(III) Aggregate reported amount.--The term
`aggregate reported amount' means the aggregate amount
of dividends reported by the company under clause (i)
as interest related dividends for the taxable year
(including interest related dividends paid after the
close of the taxable year described in section 855).
``(IV) Post-december reported amount.--The term
`post-December reported amount' means the aggregate
reported amount determined by taking into account only
dividends paid after December 31 of the taxable year.
``(v) Termination.--The term `interest related
dividend' shall not include any dividend with respect to''.
(2) Short-term capital gain dividends.--Subparagraph (C) of
section 871(k)(2) is amended by striking all that precedes ``any
taxable year of the company beginning'' and inserting the
following:
``(C) Short-term capital gain dividend.--For purposes of
this paragraph--
``(i) In general.--Except as provided in clause (ii),
the term `short-term capital gain dividend' means any
dividend, or part thereof, which is reported by the company
as a short-term capital gain dividend in written statements
furnished to its shareholders.
``(ii) Excess reported amounts.--If the aggregate
reported amount with respect to the company for any taxable
year exceeds the qualified short-term gain of the company
for such taxable year, the term `short-term capital gain
dividend' means the excess of--
``(I) the reported short-term capital gain dividend
amount, over
``(II) the excess reported amount which is
allocable to such reported short-term capital gain
dividend amount.
``(iii) Allocation of excess reported amount.--
``(I) In general.--Except as provided in subclause
(II), the excess reported amount (if any) which is
allocable to the reported short-term capital gain
dividend amount is that portion of the excess reported
amount which bears the same ratio to the excess
reported amount as the reported short-term capital gain
dividend amount bears to the aggregate reported amount.
``(II) Special rule for noncalendar year
taxpayers.--In the case of any taxable year which does
not begin and end in the same calendar year, if the
post-December reported amount equals or exceeds the
excess reported amount for such taxable year, subclause
(I) shall be applied by substituting `post-December
reported amount' for `aggregate reported amount' and no
excess reported amount shall be allocated to any
dividend paid on or before December 31 of such taxable
year.
``(iv) Definitions.--For purposes of this
subparagraph--
``(I) Reported short-term capital gain dividend
amount.--The term `reported short-term capital gain
dividend amount' means the amount reported to its
shareholders under clause (i) as a short-term capital
gain dividend.
``(II) Excess reported amount.--The term `excess
reported amount' means the excess of the aggregate
reported amount over the qualified short-term gain of
the company for the taxable year.
``(III) Aggregate reported amount.--The term
`aggregate reported amount' means the aggregate amount
of dividends reported by the company under clause (i)
as short-term capital gain dividends for the taxable
year (including short-term capital gain dividends paid
after the close of the taxable year described in
section 855).
``(IV) Post-december reported amount.--The term
`post-December reported amount' means the aggregate
reported amount determined by taking into account only
dividends paid after December 31 of the taxable year.
``(v) Termination.--The term `short-term capital gain
dividend' shall not include any dividend with respect to''.
(g) Conforming Amendments.--Section 855 is amended--
(1) by striking subsection (c) and redesignating subsection (d)
as subsection (c), and
(2) by striking ``, (c) and (d)'' in subsection (a) and
inserting ``and (c)''.
(h) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
(i) Application of JGTRRA Sunset.--Section 303 of the Jobs and
Growth Tax Relief Reconciliation Act of 2003 shall apply to the
amendments made by subparagraphs (B) and (D) of subsection (e)(1) to
the same extent and in the same manner as section 303 of such Act
applies to the amendments made by section 302 of such Act.

6793350b5ee498fa6aab08767579385c34e9ea0f50c46b56ab21957c511832ac

(a) In General.--Paragraph (1) of section 852(c) is amended to read
as follows:
``(1) Treatment of nondeductible items.--
``(A) Net capital loss.--If a regulated investment company
has a net capital loss for any taxable year--
``(i) such net capital loss shall not be taken into
account for purposes of determining the company's earnings
and profits, and
``(ii) any capital loss arising on the first day of the
next taxable year by reason of clause (ii) or (iii) of
section 1212(a)(3)(A) shall be treated as so arising for
purposes of determining earnings and profits.
``(B) Other nondeductible items.--
``(i) In general.--The earnings and profits of a
regulated investment company for any taxable year (but not
its accumulated earnings and profits) shall not be reduced
by any amount which is not allowable as a deduction (other
than by reason of section 265 or 171(a)(2)) in computing
its taxable income for such taxable year.
``(ii) Coordination with treatment of net capital
losses.--Clause (i) shall not apply to a net capital loss
to which subparagraph (A) applies.''.
(b) Conforming Amendments.--
(1) Subsection (c) of section 852 is amended by adding at the
end the following new paragraph:
``(4) Regulated investment company.--For purposes of this
subsection, the term `regulated investment company' includes a
domestic corporation which is a regulated investment company
determined without regard to the requirements of subsection (a).''.
(2) Paragraphs (1)(A) and (2)(A) of section 871(k) are each
amended by inserting ``which meets the requirements of section
852(a) for the taxable year with respect to which the dividend is
paid'' before the period at the end.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.

d137783a2c52624cf85d59343979421c83d4bf4041a64963adefecdaf2942bc2

CREDITS IN FUND OF FUNDS STRUCTURE.
(a) In General.--Section 852 is amended by adding at the end the
following new subsection:
``(g) Special Rules for Fund of Funds.--
``(1) In general.--In the case of a qualified fund of funds--
``(A) such fund shall be qualified to pay exempt-interest
dividends to its shareholders without regard to whether such
fund satisfies the requirements of the first sentence of
subsection (b)(5), and
``(B) such fund may elect the application of section 853
(relating to foreign tax credit allowed to shareholders)
without regard to the requirement of subsection (a)(1) thereof.
``(2) Qualified fund of funds.--For purposes of this
subsection, the term `qualified fund of funds' means a regulated
investment company if (at the close of each quarter of the taxable
year) at least 50 percent of the value of its total assets is
represented by interests in other regulated investment
companies.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.

16f3b5687c6ba28fc29fc2f221c01e4e7ebe17d702513afa10c8808cafee5b4e

REGULATED INVESTMENT COMPANIES.
(a) Deadline for Declaration of Dividend.--Paragraph (1) of section
855(a) is amended to read as follows:
``(1) declares a dividend before the later of--
``(A) the 15th day of the 9th month following the close of
the taxable year, or
``(B) in the case of an extension of time for filing the
company's return for the taxable year, the due date for filing
such return taking into account such extension, and''.
(b) Deadline for Distribution of Dividend.--Paragraph (2) of
section 855(a) is amended by striking ``the first regular dividend
payment'' and inserting ``the first dividend payment of the same type
of dividend''.
(c) Short-term Capital Gain.--Subsection (a) of section 855 is
amended by adding at the end the following: ``For purposes of paragraph
(2), a dividend attributable to any short-term capital gain with
respect to which a notice is required under the Investment Company Act
of 1940 shall be treated as the same type of dividend as a capital gain
dividend.''.
(d) Effective Date.--The amendments made by this section shall
apply to distributions in taxable years beginning after the date of the
enactment of this Act.

d33d358cbba50fe69bf3111aa7321013a242dc0957f8c93752adb5c072e68a41

COMPANIES.
(a) In General.--Subsection (b) of section 316 is amended by adding
at the end the following new paragraph:
``(4) Certain distributions by regulated investment companies
in excess of earnings and profits.--In the case of a regulated
investment company that has a taxable year other than a calendar
year, if the distributions by the company with respect to any class
of stock of such company for the taxable year exceed the company's
current and accumulated earnings and profits which may be used for
the payment of dividends on such class of stock, the company's
current earnings and profits shall, for purposes of subsection (a),
be allocated first to distributions with respect to such class of
stock made during the portion of the taxable year which precedes
January 1.''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions made in taxable years beginning after the date of the
enactment of this Act.

1f323719396f352de80d51c28ab9b134d9a97b9e3dbc065e87e4d3df43647278

INVESTMENT COMPANY.
(a) Redemptions Treated as Exchanges.--
(1) In general.--Subsection (b) of section 302 is amended by
redesignating paragraph (5) as paragraph (6) and by inserting after
paragraph (4) the following new paragraph:
``(5) Redemptions by certain regulated investment companies.--
Except to the extent provided in regulations prescribed by the
Secretary, subsection (a) shall apply to any distribution in
redemption of stock of a publicly offered regulated investment
company (within the meaning of section 67(c)(2)(B)) if--
``(A) such redemption is upon the demand of the
stockholder, and
``(B) such company issues only stock which is redeemable
upon the demand of the stockholder.''.
(2) Conforming amendment.--Subsection (a) of section 302 is
amended by striking ``or (4)'' and inserting ``(4), or (5)''.
(b) Losses on Redemptions Not Disallowed for Fund-of-funds
Regulated Investment Companies.--Paragraph (3) of section 267(f) is
amended by adding at the end the following new subparagraph:
``(D) Redemptions by fund-of-funds regulated investment
companies.--Except to the extent provided in regulations
prescribed by the Secretary, subsection (a)(1) shall not apply
to any distribution in redemption of stock of a regulated
investment company if--
``(i) such company issues only stock which is
redeemable upon the demand of the stockholder, and
``(ii) such redemption is upon the demand of another
regulated investment company.''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after the date of the enactment of this Act.

41e46276f2c12794217a1394fd811bf4ab43381061f53e2b1bfaf701547cfcd2

REGULATED INVESTMENT COMPANIES.
(a) In General.--Subsection (c) of section 562 is amended by
striking ``The amount'' and inserting ``Except in the case of a
publicly offered regulated investment company (as defined in section
67(c)(2)(B)), the amount''.
(b) Conforming Amendment.--Section 562(c) is amended by inserting
``(other than a publicly offered regulated investment company (as so
defined))'' after ``regulated investment company'' in the second
sentence thereof.
(c) Effective Date.--The amendments made by this section shall
apply to distributions in taxable years beginning after the date of the
enactment of this Act.

f161214d330e5825b48efd574fa6dc5d18d2177f5e2de7da9dab92927576265b

REGULATED INVESTMENT COMPANIES.
(a) In General.--Paragraph (8) of section 852(b) is amended to read
as follows:
``(8) Elective deferral of certain late-year losses.--
``(A) In general.--Except as otherwise provided by the
Secretary, a regulated investment company may elect for any
taxable year to treat any portion of any qualified late-year
loss for such taxable year as arising on the first day of the
following taxable year for purposes of this title.
``(B) Qualified late-year loss.--For purposes of this
paragraph, the term `qualified late-year loss' means--
``(i) any post-October capital loss, and
``(ii) any late-year ordinary loss.
``(C) Post-october capital loss.--For purposes of this
paragraph, the term `post-October capital loss' means the
greatest of--
``(i) the net capital loss attributable to the portion
of the taxable year after October 31,
``(ii) the net long-term capital loss attributable to
such portion of the taxable year, or
``(iii) the net short-term capital loss attributable to
such portion of the taxable year.
``(D) Late-year ordinary loss.--For purposes of this
paragraph, the term `late-year ordinary loss' means the excess
(if any) of--
``(i) the sum of--
``(I) the specified losses (as defined in section
4982(e)(5)(B)(ii)) attributable to the portion of the
taxable year after October 31, plus
``(II) the ordinary losses not described in
subclause (I) attributable to the portion of the
taxable year after December 31, over
``(ii) the sum of--
``(I) the specified gains (as defined in section
4982(e)(5)(B)(i)) attributable to the portion of the
taxable year after October 31, plus
``(II) the ordinary income not described in
subclause (I) attributable to the portion of the
taxable year after December 31.
``(E) Special rule for companies determining required
capital gain distributions on taxable year basis.--In the case
of a company to which an election under section 4982(e)(4)
applies--
``(i) if such company's taxable year ends with the
month of November, the amount of qualified late-year losses
(if any) shall be computed without regard to any income,
gain, or loss described in subparagraphs (C), (D)(i)(I),
and (D)(ii)(I), and
``(ii) if such company's taxable year ends with the
month of December, subparagraph (A) shall not apply.''.
(b) Conforming Amendments.--
(1) Subsection (b) of section 852 is amended by striking
paragraph (10).
(2) Paragraph (2) of section 852(c) is amended by striking the
first sentence and inserting the following: ``For purposes of
applying this chapter to distributions made by a regulated
investment company with respect to any calendar year, the earnings
and profits of such company shall be determined without regard to
any net capital loss attributable to the portion of the taxable
year after October 31 and without regard to any late-year ordinary
loss (as defined in subsection (b)(8)(D)).''
(3) Subparagraph (D) of section 871(k)(2) is amended by
striking the last two sentences and inserting the following: ``For
purposes of this subparagraph, the net short-term capital gain of
the regulated investment company shall be computed by treating any
short-term capital gain dividend includible in gross income with
respect to stock of another regulated investment company as a
short-term capital gain.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.

a1b27cf8125faf64c2b29effce8c5cf807277e892503165bfbf66a9fcadf6448

REGULARLY DECLARED EXEMPT-INTEREST DIVIDENDS.
(a) In General.--Subparagraph (E) of section 852(b)(4) is amended
by striking all that precedes ``In the case of a regulated investment
company'' and inserting the following:
``(E) Exception to holding period requirement for certain
regularly declared exempt-interest dividends.--
``(i) Daily dividend companies.--Except as otherwise
provided by regulations, subparagraph (B) shall not apply
with respect to a regular dividend paid by a regulated
investment company which declares exempt-interest dividends
on a daily basis in an amount equal to at least 90 percent
of its net tax-exempt interest and distributes such
dividends on a monthly or more frequent basis.
``(ii) Authority to shorten required holding period
with respect to other companies.--''.
(b) Conforming Amendment.--Clause (ii) of section 852(b)(4)(E), as
amended by subsection (a), is amended by inserting ``(other than a
company described in clause (i))'' after ``regulated investment
company''.
(c) Effective Date.--The amendments made by this section shall
apply to losses incurred on shares of stock for which the taxpayer's
holding period begins after the date of the enactment of this Act.
INVESTMENT COMPANIES

99ce1a7215c7fa7ea71bd2198eef2620942b40f1135c7d719cdd6453e4ccee08

COMPANIES OWNED BY TAX EXEMPT ENTITIES.
(a) In General.--Subsection (f) of section 4982 is amended--
(1) by striking ``either'' in the matter preceding paragraph
(1),
(2) by striking ``or'' at the end of paragraph (1),
(3) by striking the period at the end of paragraph (2), and
(4) by inserting after paragraph (2) the following new
paragraphs:
``(3) any other tax-exempt entity whose ownership of beneficial
interests in the company would not preclude the application of
section 817(h)(4), or
``(4) another regulated investment company described in this
subsection.''.
(b) Effective Date.--The amendment made by this section shall apply
to calendar years beginning after the date of the enactment of this
Act.

fecbc8db1606d34fa54782c39c3b8cdc697525f65f7c747f1d2c0b9da1306d43

INVESTMENT COMPANIES FOR EXCISE TAX PURPOSES.
(a) In General.--Subsection (e) of section 4982 is amended by
striking paragraphs (5) and (6) and inserting the following new
paragraphs:
``(5) Treatment of specified gains and losses after october 31
of calendar year.--
``(A) In general.--Any specified gain or specified loss
which (but for this paragraph) would be properly taken into
account for the portion of the calendar year after October 31
shall be treated as arising on January 1 of the following
calendar year.
``(B) Specified gains and losses.--For purposes of this
paragraph--
``(i) Specified gain.--The term `specified gain' means
ordinary gain from the sale, exchange, or other disposition
of property (including the termination of a position with
respect to such property). Such term shall include any
foreign currency gain attributable to a section 988
transaction (within the meaning of section 988) and any
amount includible in gross income under section 1296(a)(1).
``(ii) Specified loss.--The term `specified loss' means
ordinary loss from the sale, exchange, or other disposition
of property (including the termination of a position with
respect to such property). Such term shall include any
foreign currency loss attributable to a section 988
transaction (within the meaning of section 988) and any
amount allowable as a deduction under section 1296(a)(2).
``(C) Special rule for companies electing to use the
taxable year.--In the case of any company making an election
under paragraph (4), subparagraph (A) shall be applied by
substituting the last day of the company's taxable year for
October 31.
``(6) Treatment of mark to market gain.--
``(A) In general.--For purposes of determining a regulated
investment company's ordinary income, notwithstanding paragraph
(1)(C), each specified mark to market provision shall be
applied as if such company's taxable year ended on October 31.
In the case of a company making an election under paragraph
(4), the preceding sentence shall be applied by substituting
the last day of the company's taxable year for October 31.
``(B) Specified mark to market provision.--For purposes of
this paragraph, the term `specified mark to market provision'
means sections 1256 and 1296 and any other provision of this
title (or regulations thereunder) which treats property as
disposed of on the last day of the taxable year.
``(7) Elective deferral of certain ordinary losses.--Except as
provided in regulations prescribed by the Secretary, in the case of
a regulated investment company which has a taxable year other than
the calendar year--
``(A) such company may elect to determine its ordinary
income for the calendar year without regard to any net ordinary
loss (determined without regard to specified gains and losses
taken into account under paragraph (5)) which is attributable
to the portion of such calendar year which is after the
beginning of the taxable year which begins in such calendar
year, and
``(B) any amount of net ordinary loss not taken into
account for a calendar year by reason of subparagraph (A) shall
be treated as arising on the 1st day of the following calendar
year.''.
(b) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after the date of the enactment of
this Act.

7f54a7f98217c68d84eadd7e6c93bc7d85f45b4e000ae91d747126ee78c30f3d

BASIS OF TAXES PAID BY REGULATED INVESTMENT COMPANY.
(a) In General.--Subsection (c) of section 4982 is amended by
adding at the end the following new paragraph:
``(4) Special rule for estimated tax payments.--
``(A) In general.--In the case of a regulated investment
company which elects the application of this paragraph for any
calendar year--
``(i) the distributed amount with respect to such
company for such calendar year shall be increased by the
amount on which qualified estimated tax payments are made
by such company during such calendar year, and
``(ii) the distributed amount with respect to such
company for the following calendar year shall be reduced by
the amount of such increase.
``(B) Qualified estimated tax payments.--For purposes of
this paragraph, the term `qualified estimated tax payments'
means, with respect to any calendar year, payments of estimated
tax of a tax described in paragraph (1)(B) for any taxable year
which begins (but does not end) in such calendar year.''.
(b) Effective Date.--The amendment made by this section shall apply
to calendar years beginning after the date of the enactment of this
Act.

fc1887cd1cf1df1cb50a8bc89eb7c49d839f2793d5acabbe23369463635f3efc

INCOME.
(a) In General.--Subparagraph (B) of section 4982(b)(1) is amended
by striking ``98 percent'' and inserting ``98.2 percent''.
(b) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after the date of the enactment of
this Act.

71f3e81dfac6b55fd577c0465324eed8088c3717c88417c7c82b831438db15fb

FOR TAX OF REGULATED INVESTMENT COMPANIES.
(a) In General.--Part I of subchapter B of chapter 68 is amended by
striking section 6697 (and by striking the item relating to such
section in the table of sections of such part).
(b) Conforming Amendment.--Section 860 is amended by striking
subsection (j).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.

219174424defe6ca21d00c47eda9b8d1098ba9195a8272f1c5419fe8085eac63

REGULATED INVESTMENT COMPANIES.
(a) In General.--Subparagraph (C) of section 852(f)(1) is amended
by striking ``subsequently acquires'' and inserting ``acquires, during
the period beginning on the date of the disposition referred to in
subparagraph (B) and ending on January 31 of the calendar year
following the calendar year that includes the date of such
disposition,''.
(b) Effective Date.--The amendment made by this section shall apply
to charges incurred in taxable years beginning after the date of the
enactment of this Act.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.

59a79234307123958536dcffbcc331f841741ec43e4bf255f412c36665ff2b23

Regulated Investment Company Modernization Act of 2009 — HR. 4337

Other Sections

TITLE I

TITLE II

TITLE III

TITLE IV

TITLE V

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