I 

112TH CONGRESS 

2D SESSION H. R. 4623 

To amend the Internal Revenue Code of 1986 to expand and make permanent 

rules related to investment by nonresident aliens in domestic mutual funds. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 25, 2012 

Mr. PAULSEN (for himself and Mr. CAMPBELL) introduced the following bill; 

which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to expand 

and make permanent rules related to investment by nonresident aliens in domestic mutual funds. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. EXEMPTION FOR CERTAIN DIVIDENDS PAID BY 

4 REGULATED INVESTMENT COMPANIES TO 

5 NONRESIDENT ALIENS EXPANDED AND MADE 

6 PERMANENT. 

7 (a) EXEMPTIONS FOR CERTAIN DIVIDENDS MADE

8 PERMANENT.— 

9 (1) INTEREST-RELATED DIVIDENDS.—Subpara10 graph (C) of section 871(k)(1) of the Internal RevVerDate Mar 15 2010 00:36 Apr 28, 2012 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4623.IH H4623

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1 enue Code of 1986 is amended by striking clause 

2 (v). 

3 (2) CAPITAL GAIN DIVIDENDS.—Subparagraph 

4 (C) of section 871(k)(2) of such Code is amended by 

5 striking clause (v). 

6 (b) EXPANSION OF EXEMPTION FOR INTEREST-RE7 LATED DIVIDENDS.— 

8 (1) IN GENERAL.—Subparagraph (E) of section 

9 871(k)(1) of such Code is amended by striking 

10 clauses (iii) and (iv) and inserting the following new 

11 clauses: 

12 ‘‘(iii) Any amount referred to in sub13 section (i)(2)(A) (without regard to the 

14 trade or business of the regulated invest15 ment company) or in subsection (i)(2)(B). 

16 ‘‘(iv) Any interest which is exempt 

17 from tax under section 103 or any other 

18 provision of law without regard to the 

19 identity of the holder. 

20 ‘‘(v) Any other amount includible in 

21 gross income that is determined by ref22 erence to an interest rate and that would 

23 not be subject to withholding under section 

24 1441 if received by a nonresident alien in25 dividual. 


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1 ‘‘(vi) Any amount includible in gross 

2 income from sources without the United 

3 States. 

4 ‘‘(vii) Any qualified income-related 

5 dividend includible in gross income with re6 spect to stock of another regulated invest7 ment company.’’. 

8 (2) MODIFICATION OF EXCEPTIONS.—Clause (i) 

9 of section 871(k)(1)(B) is amended by striking ‘‘in10 terest (other than interest described in subparagraph 

11 (E)(i) or (iii))’’ and inserting ‘‘interest described in 

12 subparagraph (E)(ii) (and not described in subpara13 graph (E) (i), (iii), or (iv))’’. 

14 (3) CONFORMING AMENDMENTS.— 

15 (A) Paragraph (1) of section 871(k) of 

16 such Code is amended— 

17 (i) by striking ‘‘interest-related divi18 dend’’ each place it appears in the text and 

19 inserting ‘‘qualified income-related divi20 dend’’, 

21 (ii) by striking ‘‘qualified net interest 

22 income’’ each place it appears in the text 

23 and inserting ‘‘qualified net income’’, 


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1 (iii) by striking ‘‘qualified interest in2 come’’ each place it appears in the text 

3 and inserting ‘‘qualified income’’, 

4 (iv) by striking ‘‘INTEREST-RELATED

5 DIVIDENDS’’ in the heading thereof and in6 serting ‘‘QUALIFIED INCOME-RELATED

7 DIVIDENDS’’, 

8 (v) by striking ‘‘INTEREST RELATED

9 DIVIDEND’’ in the heading of subparagraph 

10 (C) and inserting ‘‘QUALIFIED INCOME-RE11 LATED DIVIDEND’’, 

12 (vi) by striking ‘‘QUALIFIED NET IN13 TEREST INCOME’’ in the heading of sub14 paragraph (D) and inserting ‘‘QUALIFIED

15 NET INCOME’’, and 

16 (vii) by striking ‘‘QUALIFIED INTER17 EST INCOME’’ in the heading of subpara18 graph (E) and inserting ‘‘QUALIFIED IN19 COME’’. 

20 (B) Paragraph (1) of section 881(e) of 

21 such Code is amended— 

22 (i) by striking ‘‘interest-related divi23 dend’’ each place it appears in subpara24 graphs (A) and (B) and inserting ‘‘quali25 fied income-related dividend’’, 


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1 (ii) by striking ‘‘interest received’’ in 

2 subparagraph (B)(ii) and inserting ‘‘inter3 est described in clause (ii) of section 

4 871(k)(1)(E) (and not described in clause 

5 (i), (iii), or (iv) of such section) received’’, 

6 (iii) by striking ‘‘interest-related divi7 dend received’’ in subparagraph (C) and 

8 inserting ‘‘qualified income-related divi9 dend received from a regulated investment 

10 company’’, 

11 (iv) by striking ‘‘clause (i) or (iii)’’ in 

12 subparagraph (C) and inserting ‘‘clause 

13 (i), (iii), or (iv)’’, and 

14 (v) by striking ‘‘INTEREST-RELATED

15 DIVIDENDS’’ in the heading thereof and in16 serting ‘‘QUALIFIED INCOME-RELATED

17 DIVIDENDS’’. 

18 (c) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to dividends with respect to taxable 

20 years of regulated investment companies beginning after 

21 December 31, 2011. 

Æ 


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