In the Senate of the United States, 

December 8, 2010. 

Resolved, That the bill from the House of Representatives (H.R. 4337) entitled ‘‘An Act to amend the Internal 

Revenue Code of 1986 to modify certain rules applicable to 

regulated investment companies, and for other purposes.’’, do 

pass with the following 

AMENDMENT: 

Strike all after the enacting clause and insert the 

following: 

1 SECTION 1. SHORT TITLE, ETC. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Regulated Investment Company Modernization Act of 

4 2010’’. 

5 (b) REFERENCE.—Except as otherwise expressly pro6 vided, whenever in this Act an amendment or repeal is ex7 pressed in terms of an amendment to, or repeal of, a section 

8 or other provision, the reference shall be considered to be 
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1 made to a section or other provision of the Internal Revenue 

2 Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents for 

4 this Act is as follows: 

Sec. 1. Short title, etc. 

TITLE I—CAPITAL LOSS CARRYOVERS OF REGULATED INVESTMENT 

COMPANIES 

Sec. 101. Capital loss carryovers of regulated investment companies. 

TITLE II—MODIFICATION OF GROSS INCOME AND ASSET TESTS OF 

REGULATED INVESTMENT COMPANIES 

Sec. 201. Savings provisions for failures of regulated investment companies to 

satisfy gross income and asset tests. 

TITLE III—MODIFICATION OF RULES RELATED TO DIVIDENDS AND 

OTHER DISTRIBUTIONS 

Sec. 301. Modification of dividend designation requirements and allocation rules 

for regulated investment companies. 

Sec. 302. Earnings and profits of regulated investment companies. 

Sec. 303. Pass-thru of exempt-interest dividends and foreign tax credits in fund 

of funds structure. 

Sec. 304. Modification of rules for spillover dividends of regulated investment 

companies. 

Sec. 305. Return of capital distributions of regulated investment companies. 

Sec. 306. Distributions in redemption of stock of a regulated investment company. 

Sec. 307. Repeal of preferential dividend rule for publicly offered regulated investment companies. 

Sec. 308. Elective deferral of certain late-year losses of regulated investment companies. 

Sec. 309. Exception to holding period requirement for certain regularly declared 

exempt-interest dividends. 

TITLE IV—MODIFICATIONS RELATED TO EXCISE TAX APPLICABLE 

TO REGULATED INVESTMENT COMPANIES 

Sec. 401. Excise tax exemption for certain regulated investment companies owned 

by tax exempt entities. 

Sec. 402. Deferral of certain gains and losses of regulated investment companies 

for excise tax purposes. 

Sec. 403. Distributed amount for excise tax purposes determined on basis of taxes 

paid by regulated investment company. 

Sec. 404. Increase in required distribution of capital gain net income. 

TITLE V—OTHER PROVISIONS 

Sec. 501. Repeal of assessable penalty with respect to liability for tax of regulated 

investment companies. 
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Sec. 502. Modification of sales load basis deferral rule for regulated investment 

companies. 

1 TITLE I—CAPITAL LOSS 

2 CARRYOVERS OF REGULATED 

3 INVESTMENT COMPANIES 

4 SEC. 101. CAPITAL LOSS CARRYOVERS OF REGULATED IN5 VESTMENT COMPANIES. 

6 (a) IN GENERAL.—Subsection (a) of section 1212 is 

7 amended by redesignating paragraph (3) as paragraph (4) 

8 and by inserting after paragraph (2) the following new 

9 paragraph: 

10 ‘‘(3) REGULATED INVESTMENT COMPANIES.— 

11 ‘‘(A) IN GENERAL.—If a regulated invest12 ment company has a net capital loss for any 

13 taxable year— 

14 ‘‘(i) paragraph (1) shall not apply to 

15 such loss, 

16 ‘‘(ii) the excess of the net short-term 

17 capital loss over the net long-term capital 

18 gain for such year shall be a short-term 

19 capital loss arising on the first day of the 

20 next taxable year, and 

21 ‘‘(iii) the excess of the net long-term 

22 capital loss over the net short-term capital 

23 gain for such year shall be a long-term cap-
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† HR 4337 EAS 

1 ital loss arising on the first day of the next 

2 taxable year. 

3 ‘‘(B) COORDINATION WITH GENERAL

4 RULE.—If a net capital loss to which paragraph 

5 (1) applies is carried over to a taxable year of 

6 a regulated investment company— 

7 ‘‘(i) LOSSES TO WHICH THIS PARA8 GRAPH APPLIES.—Clauses (ii) and (iii) of 

9 subparagraph (A) shall be applied without 

10 regard to any amount treated as a short11 term capital loss under paragraph (1). 

12 ‘‘(ii) LOSSES TO WHICH GENERAL

13 RULE APPLIES.—Paragraph (1) shall be ap14 plied by substituting ‘net capital loss for the 

15 loss year or any taxable year thereafter 

16 (other than a net capital loss to which 

17 paragraph (3)(A) applies)’ for ‘net capital 

18 loss for the loss year or any taxable year 

19 thereafter’.’’. 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) Subparagraph (C) of section 1212(a)(1) is 

22 amended to read as follows: 

23 ‘‘(C) a capital loss carryover to each of the 

24 10 taxable years succeeding the loss year, but 
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1 only to the extent such loss is attributable to a 

2 foreign expropriation loss,’’. 

3 (2) Paragraph (10) of section 1222 is amended 

4 by striking ‘‘section 1212’’ and inserting ‘‘section 

5 1212(a)(1)’’. 

6 (c) EFFECTIVE DATE.— 

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the amendments made by this section shall 

9 apply to net capital losses for taxable years beginning 

10 after the date of the enactment of this Act. 

11 (2) COORDINATION RULES.—Subparagraph (B) 

12 of section 1212(a)(3) of the Internal Revenue Code of 

13 1986, as added by this section, shall apply to taxable 

14 years beginning after the date of the enactment of this 

15 Act. 

16 TITLE II—MODIFICATION OF 

17 GROSS INCOME AND ASSET 

18 TESTS OF REGULATED IN19 VESTMENT COMPANIES 

20 SEC. 201. SAVINGS PROVISIONS FOR FAILURES OF REGU21 LATED INVESTMENT COMPANIES TO SATISFY 

22 GROSS INCOME AND ASSET TESTS. 

23 (a) ASSET TEST.—Subsection (d) of section 851 is 

24 amended— 
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1 (1) by striking ‘‘A corporation which meets’’ and 

2 inserting the following: 

3 ‘‘(1) IN GENERAL.—A corporation which meets’’, 

4 and 

5 (2) by adding at the end the following new para6 graph: 

7 ‘‘(2) SPECIAL RULES REGARDING FAILURE TO

8 SATISFY REQUIREMENTS.—If paragraph (1) does not 

9 preserve a corporation’s status as a regulated invest10 ment company for any particular quarter— 

11 ‘‘(A) IN GENERAL.—A corporation that fails 

12 to meet the requirements of subsection (b)(3) 

13 (other than a failure described in subparagraph 

14 (B)(i)) for such quarter shall nevertheless be con15 sidered to have satisfied the requirements of such 

16 subsection for such quarter if— 

17 ‘‘(i) following the corporation’s identi18 fication of the failure to satisfy the require19 ments of such subsection for such quarter, a 

20 description of each asset that causes the cor21 poration to fail to satisfy the requirements 

22 of such subsection at the close of such quar23 ter is set forth in a schedule for such quar24 ter filed in the manner provided by the Sec25 retary, 
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1 ‘‘(ii) the failure to meet the require2 ments of such subsection for such quarter is 

3 due to reasonable cause and not due to will4 ful neglect, and 

5 ‘‘(iii)(I) the corporation disposes of the 

6 assets set forth on the schedule specified in 

7 clause (i) within 6 months after the last 

8 day of the quarter in which the corpora9 tion’s identification of the failure to satisfy 

10 the requirements of such subsection occurred 

11 or such other time period prescribed by the 

12 Secretary and in the manner prescribed by 

13 the Secretary, or 

14 ‘‘(II) the requirements of such sub15 section are otherwise met within the time 

16 period specified in subclause (I). 

17 ‘‘(B) RULE FOR CERTAIN DE MINIMIS FAIL18 URES.—A corporation that fails to meet the re19 quirements of subsection (b)(3) for such quarter 

20 shall nevertheless be considered to have satisfied 

21 the requirements of such subsection for such 

22 quarter if— 

23 ‘‘(i) such failure is due to the owner24 ship of assets the total value of which does 

25 not exceed the lesser of— 
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1 ‘‘(I) 1 percent of the total value of 

2 the corporation’s assets at the end of 

3 the quarter for which such measure4 ment is done, or 

5 ‘‘(II) $10,000,000, and 

6 ‘‘(ii)(I) the corporation, following the 

7 identification of such failure, disposes of as8 sets in order to meet the requirements of 

9 such subsection within 6 months after the 

10 last day of the quarter in which the cor11 poration’s identification of the failure to 

12 satisfy the requirements of such subsection 

13 occurred or such other time period pre14 scribed by the Secretary and in the manner 

15 prescribed by the Secretary, or 

16 ‘‘(II) the requirements of such sub17 section are otherwise met within the time 

18 period specified in subclause (I). 

19 ‘‘(C) TAX.— 

20 ‘‘(i) TAX IMPOSED.—If subparagraph 

21 (A) applies to a corporation for any quar22 ter, there is hereby imposed on such cor23 poration a tax in an amount equal to the 

24 greater of— 

25 ‘‘(I) $50,000, or 
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1 ‘‘(II) the amount determined 

2 (pursuant to regulations promulgated 

3 by the Secretary) by multiplying the 

4 net income generated by the assets de5 scribed in the schedule specified in sub6 paragraph (A)(i) for the period speci7 fied in clause (ii) by the highest rate of 

8 tax specified in section 11. 

9 ‘‘(ii) PERIOD.—For purposes of clause 

10 (i)(II), the period described in this clause is 

11 the period beginning on the first date that 

12 the failure to satisfy the requirements of 

13 subsection (b)(3) occurs as a result of the 

14 ownership of such assets and ending on the 

15 earlier of the date on which the corporation 

16 disposes of such assets or the end of the first 

17 quarter when there is no longer a failure to 

18 satisfy such subsection. 

19 ‘‘(iii) ADMINISTRATIVE PROVISIONS.— 

20 For purposes of subtitle F, a tax imposed by 

21 this subparagraph shall be treated as an ex22 cise tax with respect to which the deficiency 

23 procedures of such subtitle apply.’’. 

24 (b) GROSS INCOME TEST.—Section 851 is amended by 

25 adding at the end the following new subsection: 
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1 ‘‘(i) FAILURE TO SATISFY GROSS INCOME TEST.— 

2 ‘‘(1) DISCLOSURE REQUIREMENT.—A corpora3 tion that fails to meet the requirement of paragraph 

4 (2) of subsection (b) for any taxable year shall never5 theless be considered to have satisfied the requirement 

6 of such paragraph for such taxable year if— 

7 ‘‘(A) following the corporation’s identifica8 tion of the failure to meet such requirement for 

9 such taxable year, a description of each item of 

10 its gross income described in such paragraph is 

11 set forth in a schedule for such taxable year filed 

12 in the manner provided by the Secretary, and 

13 ‘‘(B) the failure to meet such requirement is 

14 due to reasonable cause and not due to willful 

15 neglect. 

16 ‘‘(2) IMPOSITION OF TAX ON FAILURES.—If 

17 paragraph (1) applies to a regulated investment com18 pany for any taxable year, there is hereby imposed on 

19 such company a tax in an amount equal to the excess 

20 of— 

21 ‘‘(A) the gross income of such company 

22 which is not derived from sources referred to in 

23 subsection (b)(2), over 

‘‘(B) 1 24 ⁄9 of the gross income of such com25 pany which is derived from such sources.’’. 
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† HR 4337 EAS 

1 (c) DEDUCTION OF TAXES PAID FROM INVESTMENT

2 COMPANY TAXABLE INCOME.—Paragraph (2) of section 

3 852(b) is amended by adding at the end the following new 

4 subparagraph: 

5 ‘‘(G) There shall be deducted an amount 

6 equal to the tax imposed by subsections (d)(2) 

7 and (i) of section 851 for the taxable year.’’. 

8 (d) EFFECTIVE DATE.—The amendments made by this 

9 section shall apply to taxable years with respect to which 

10 the due date (determined with regard to any extensions) 

11 of the return of tax for such taxable year is after the date 

12 of the enactment of this Act. 

13 TITLE III—MODIFICATION OF 

14 RULES RELATED TO DIVI15 DENDS AND OTHER DIS16 TRIBUTIONS 

17 SEC. 301. MODIFICATION OF DIVIDEND DESIGNATION RE18 QUIREMENTS AND ALLOCATION RULES FOR 

19 REGULATED INVESTMENT COMPANIES. 

20 (a) CAPITAL GAIN DIVIDENDS.— 

21 (1) IN GENERAL.—Subparagraph (C) of section 

22 852(b)(3) is amended to read as follows: 

23 ‘‘(C) DEFINITION OF CAPITAL GAIN DIVI24 DEND.—For purposes of this part— 
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† HR 4337 EAS 

1 ‘‘(i) IN GENERAL.—Except as provided 

2 in clause (ii), a capital gain dividend is 

3 any dividend, or part thereof, which is re4 ported by the company as a capital gain 

5 dividend in written statements furnished to 

6 its shareholders. 

7 ‘‘(ii) EXCESS REPORTED AMOUNTS.—If 

8 the aggregate reported amount with respect 

9 to the company for any taxable year exceeds 

10 the net capital gain of the company for such 

11 taxable year, a capital gain dividend is the 

12 excess of— 

13 ‘‘(I) the reported capital gain div14 idend amount, over 

15 ‘‘(II) the excess reported amount 

16 which is allocable to such reported cap17 ital gain dividend amount. 

18 ‘‘(iii) ALLOCATION OF EXCESS RE19 PORTED AMOUNT.— 

20 ‘‘(I) IN GENERAL.—Except as pro21 vided in subclause (II), the excess re22 ported amount (if any) which is allo23 cable to the reported capital gain divi24 dend amount is that portion of the ex25 cess reported amount which bears the 
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† HR 4337 EAS 

1 same ratio to the excess reported 

2 amount as the reported capital gain 

3 dividend amount bears to the aggregate 

4 reported amount. 

5 ‘‘(II) SPECIAL RULE FOR NONCAL6 ENDAR YEAR TAXPAYERS.—In the case 

7 of any taxable year which does not 

8 begin and end in the same calendar 

9 year, if the post-December reported 

10 amount equals or exceeds the excess re11 ported amount for such taxable year, 

12 subclause (I) shall be applied by sub13 stituting ‘post-December reported 

14 amount’ for ‘aggregate reported 

15 amount’ and no excess reported 

16 amount shall be allocated to any divi17 dend paid on or before December 31 of 

18 such taxable year. 

19 ‘‘(iv) DEFINITIONS.—For purposes of 

20 this subparagraph— 

21 ‘‘(I) REPORTED CAPITAL GAIN

22 DIVIDEND AMOUNT.—The term ‘re23 ported capital gain dividend amount’ 

24 means the amount reported to its 
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† HR 4337 EAS 

1 shareholders under clause (i) as a cap2 ital gain dividend. 

3 ‘‘(II) EXCESS REPORTED

4 AMOUNT.—The term ‘excess reported 

5 amount’ means the excess of the aggre6 gate reported amount over the net cap7 ital gain of the company for the tax8 able year. 

9 ‘‘(III) AGGREGATE REPORTED

10 AMOUNT.—The term ‘aggregate re11 ported amount’ means the aggregate 

12 amount of dividends reported by the 

13 company under clause (i) as capital 

14 gain dividends for the taxable year (in15 cluding capital gain dividends paid 

16 after the close of the taxable year de17 scribed in section 855). 

18 ‘‘(IV) POST-DECEMBER REPORTED

19 AMOUNT.—The term ‘post-December re20 ported amount’ means the aggregate 

21 reported amount determined by taking 

22 into account only dividends paid after 

23 December 31 of the taxable year. 

24 ‘‘(v) ADJUSTMENT FOR DETERMINA25 TIONS.—If there is an increase in the excess 
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† HR 4337 EAS 

1 described in subparagraph (A) for the tax2 able year which results from a determina3 tion (as defined in section 860(e)), the com4 pany may, subject to the limitations of this 

5 subparagraph, increase the amount of cap6 ital gain dividends reported under clause 

7 (i). 

8 ‘‘(vi) SPECIAL RULE FOR LOSSES LATE

9 IN THE CALENDAR YEAR.—For special rule 

10 for certain losses after October 31, see para11 graph (8).’’. 

12 (2) CONFORMING AMENDMENT.—Subparagraph 

13 (B) of section 860(f)(2) is amended by inserting ‘‘or 

14 reported (as the case may be)’’ after ‘‘designated’’. 

15 (b) EXEMPT-INTEREST DIVIDENDS.—Subparagraph 

16 (A) of section 852(b)(5) is amended to read as follows: 

17 ‘‘(A) DEFINITION OF EXEMPT-INTEREST

18 DIVIDEND.— 

19 ‘‘(i) IN GENERAL.—Except as provided 

20 in clause (ii), an exempt-interest dividend 

21 is any dividend or part thereof (other than 

22 a capital gain dividend) paid by a regu23 lated investment company and reported by 

24 the company as an exempt-interest dividend 
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† HR 4337 EAS 

1 in written statements furnished to its share2 holders. 

3 ‘‘(ii) EXCESS REPORTED AMOUNTS.—If 

4 the aggregate reported amount with respect 

5 to the company for any taxable year exceeds 

6 the exempt interest of the company for such 

7 taxable year, an exempt-interest dividend is 

8 the excess of— 

9 ‘‘(I) the reported exempt-interest 

10 dividend amount, over 

11 ‘‘(II) the excess reported amount 

12 which is allocable to such reported ex13 empt-interest dividend amount. 

14 ‘‘(iii) ALLOCATION OF EXCESS RE15 PORTED AMOUNT.— 

16 ‘‘(I) IN GENERAL.—Except as pro17 vided in subclause (II), the excess re18 ported amount (if any) which is allo19 cable to the reported exempt-interest 

20 dividend amount is that portion of the 

21 excess reported amount which bears the 

22 same ratio to the excess reported 

23 amount as the reported exempt-interest 

24 dividend amount bears to the aggregate 

25 reported amount. 
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† HR 4337 EAS 

1 ‘‘(II) SPECIAL RULE FOR NONCAL2 ENDAR YEAR TAXPAYERS.—In the case 

3 of any taxable year which does not 

4 begin and end in the same calendar 

5 year, if the post-December reported 

6 amount equals or exceeds the excess re7 ported amount for such taxable year, 

8 subclause (I) shall be applied by sub9 stituting ‘post-December reported 

10 amount’ for ‘aggregate reported 

11 amount’ and no excess reported 

12 amount shall be allocated to any divi13 dend paid on or before December 31 of 

14 such taxable year. 

15 ‘‘(iv) DEFINITIONS.—For purposes of 

16 this subparagraph— 

17 ‘‘(I) REPORTED EXEMPT-INTER18 EST DIVIDEND AMOUNT.—The term ‘re19 ported exempt-interest dividend 

20 amount’ means the amount reported to 

21 its shareholders under clause (i) as an 

22 exempt-interest dividend. 

23 ‘‘(II) EXCESS REPORTED

24 AMOUNT.—The term ‘excess reported 

25 amount’ means the excess of the aggre-
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† HR 4337 EAS 

1 gate reported amount over the exempt 

2 interest of the company for the taxable 

3 year. 

4 ‘‘(III) AGGREGATE REPORTED

5 AMOUNT.—The term ‘aggregate re6 ported amount’ means the aggregate 

7 amount of dividends reported by the 

8 company under clause (i) as exempt9 interest dividends for the taxable year 

10 (including exempt-interest dividends 

11 paid after the close of the taxable year 

12 described in section 855). 

13 ‘‘(IV) POST-DECEMBER REPORTED

14 AMOUNT.—The term ‘post-December re15 ported amount’ means the aggregate 

16 reported amount determined by taking 

17 into account only dividends paid after 

18 December 31 of the taxable year. 

19 ‘‘(V) EXEMPT INTEREST.—The 

20 term ‘exempt interest’ means, with re21 spect to any regulated investment com22 pany, the excess of the amount of inter23 est excludable from gross income under 

24 section 103(a) over the amounts dis-
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† HR 4337 EAS 

1 allowed as deductions under sections 

2 265 and 171(a)(2).’’. 

3 (c) FOREIGN TAX CREDITS.— 

4 (1) IN GENERAL.—Subsection (c) of section 853 

5 is amended— 

6 (A) by striking ‘‘so designated by the com7 pany in a written notice mailed to its share8 holders not later than 60 days after the close of 

9 the taxable year’’ and inserting ‘‘so reported by 

10 the company in a written statement furnished to 

11 such shareholder’’, and 

12 (B) by striking ‘‘NOTICE’’ in the heading 

13 and inserting ‘‘STATEMENTS’’. 

14 (2) CONFORMING AMENDMENTS.—Subsection (d) 

15 of section 853 is amended— 

16 (A) by striking ‘‘and the notice to share17 holders required by subsection (c)’’ in the text 

18 thereof, and 

19 (B) by striking ‘‘AND NOTIFYING SHARE20 HOLDERS’’ in the heading thereof. 

21 (d) CREDITS FOR TAX CREDIT BONDS.— 

22 (1) IN GENERAL.—Subsection (c) of section 853A 

23 is amended— 

24 (A) by striking ‘‘so designated by the regu25 lated investment company in a written notice 
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† HR 4337 EAS 

1 mailed to its shareholders not later than 60 days 

2 after the close of its taxable year’’ and inserting 

3 ‘‘so reported by the regulated investment com4 pany in a written statement furnished to such 

5 shareholder’’, and 

6 (B) by striking ‘‘NOTICE’’ in the heading 

7 and inserting ‘‘STATEMENTS’’. 

8 (2) CONFORMING AMENDMENTS.—Subsection (d) 

9 of section 853A is amended— 

10 (A) by striking ‘‘and the notice to share11 holders required by subsection (c)’’ in the text 

12 thereof, and 

13 (B) by striking ‘‘AND NOTIFYING SHARE14 HOLDERS’’ in the heading thereof. 

15 (e) DIVIDEND RECEIVED DEDUCTION, ETC.— 

16 (1) IN GENERAL.—Paragraph (1) of section 

17 854(b) is amended— 

18 (A) by striking ‘‘designated under this sub19 paragraph by the regulated investment com20 pany’’ in subparagraph (A) and inserting ‘‘re21 ported by the regulated investment company as 

22 eligible for such deduction in written statements 

23 furnished to its shareholders’’, 

24 (B) by striking ‘‘designated by the regulated 

25 investment company’’ in subparagraph (B)(i) 
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† HR 4337 EAS 

1 and inserting ‘‘reported by the regulated invest2 ment company as qualified dividend income in 

3 written statements furnished to its shareholders’’, 

4 (C) by striking ‘‘designated’’ in subpara5 graph (C)(i) and inserting ‘‘reported’’, and 

6 (D) by striking ‘‘designated’’ in subpara7 graph (C)(ii) and inserting ‘‘reported’’. 

8 (2) CONFORMING AMENDMENTS.—Subsection (b) 

9 of section 854 is amended by striking paragraph (2) 

10 and by redesignating paragraphs (3), (4), and (5), as 

11 paragraphs (2), (3), and (4), respectively. 

12 (f) DIVIDENDS PAID TO CERTAIN FOREIGN PER13 SONS.— 

14 (1) INTEREST-RELATED DIVIDENDS.—Subpara15 graph (C) of section 871(k)(1) is amended by striking 

16 all that precedes ‘‘any taxable year of the company 

17 beginning’’ and inserting the following: 

18 ‘‘(C) INTEREST-RELATED DIVIDEND.—For 

19 purposes of this paragraph— 

20 ‘‘(i) IN GENERAL.—Except as provided 

21 in clause (ii), an interest related dividend 

22 is any dividend, or part thereof, which is 

23 reported by the company as an interest re24 lated dividend in written statements fur25 nished to its shareholders. 
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† HR 4337 EAS 

1 ‘‘(ii) EXCESS REPORTED AMOUNTS.—If 

2 the aggregate reported amount with respect 

3 to the company for any taxable year exceeds 

4 the qualified net interest income of the com5 pany for such taxable year, an interest re6 lated dividend is the excess of— 

7 ‘‘(I) the reported interest related 

8 dividend amount, over 

9 ‘‘(II) the excess reported amount 

10 which is allocable to such reported in11 terest related dividend amount. 

12 ‘‘(iii) ALLOCATION OF EXCESS RE13 PORTED AMOUNT.— 

14 ‘‘(I) IN GENERAL.—Except as pro15 vided in subclause (II), the excess re16 ported amount (if any) which is allo17 cable to the reported interest related 

18 dividend amount is that portion of the 

19 excess reported amount which bears the 

20 same ratio to the excess reported 

21 amount as the reported interest related 

22 dividend amount bears to the aggregate 

23 reported amount. 

24 ‘‘(II) SPECIAL RULE FOR NONCAL25 ENDAR YEAR TAXPAYERS.—In the case 
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† HR 4337 EAS 

1 of any taxable year which does not 

2 begin and end in the same calendar 

3 year, if the post-December reported 

4 amount equals or exceeds the excess re5 ported amount for such taxable year, 

6 subclause (I) shall be applied by sub7 stituting ‘post-December reported 

8 amount’ for ‘aggregate reported 

9 amount’ and no excess reported 

10 amount shall be allocated to any divi11 dend paid on or before December 31 of 

12 such taxable year. 

13 ‘‘(iv) DEFINITIONS.—For purposes of 

14 this subparagraph— 

15 ‘‘(I) REPORTED INTEREST RE16 LATED DIVIDEND AMOUNT.—The term 

17 ‘reported interest related dividend 

18 amount’ means the amount reported to 

19 its shareholders under clause (i) as an 

20 interest related dividend. 

21 ‘‘(II) EXCESS REPORTED

22 AMOUNT.—The term ‘excess reported 

23 amount’ means the excess of the aggre24 gate reported amount over the qualified 
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† HR 4337 EAS 

1 net interest income of the company for 

2 the taxable year. 

3 ‘‘(III) AGGREGATE REPORTED

4 AMOUNT.—The term ‘aggregate re5 ported amount’ means the aggregate 

6 amount of dividends reported by the 

7 company under clause (i) as interest 

8 related dividends for the taxable year 

9 (including interest related dividends 

10 paid after the close of the taxable year 

11 described in section 855). 

12 ‘‘(IV) POST-DECEMBER REPORTED

13 AMOUNT.—The term ‘post-December re14 ported amount’ means the aggregate 

15 reported amount determined by taking 

16 into account only dividends paid after 

17 December 31 of the taxable year. 

18 ‘‘(v) TERMINATION.—The term ‘interest 

19 related dividend’ shall not include any divi20 dend with respect to’’. 

21 (2) SHORT-TERM CAPITAL GAIN DIVIDENDS.— 

22 Subparagraph (C) of section 871(k)(2) is amended by 

23 striking all that precedes ‘‘any taxable year of the 

24 company beginning’’ and inserting the following: 
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† HR 4337 EAS 

1 ‘‘(C) SHORT-TERM CAPITAL GAIN DIVI2 DEND.—For purposes of this paragraph— 

3 ‘‘(i) IN GENERAL.—Except as provided 

4 in clause (ii), the term ‘short-term capital 

5 gain dividend’ means any dividend, or part 

6 thereof, which is reported by the company 

7 as a short-term capital gain dividend in 

8 written statements furnished to its share9 holders. 

10 ‘‘(ii) EXCESS REPORTED AMOUNTS.—If 

11 the aggregate reported amount with respect 

12 to the company for any taxable year exceeds 

13 the qualified short-term gain of the com14 pany for such taxable year, the term ‘short15 term capital gain dividend’ means the ex16 cess of— 

17 ‘‘(I) the reported short-term cap18 ital gain dividend amount, over 

19 ‘‘(II) the excess reported amount 

20 which is allocable to such reported 

21 short-term capital gain dividend 

22 amount. 

23 ‘‘(iii) ALLOCATION OF EXCESS RE24 PORTED AMOUNT.— 
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† HR 4337 EAS 

1 ‘‘(I) IN GENERAL.—Except as pro2 vided in subclause (II), the excess re3 ported amount (if any) which is allo4 cable to the reported short-term capital 

5 gain dividend amount is that portion 

6 of the excess reported amount which 

7 bears the same ratio to the excess re8 ported amount as the reported short9 term capital gain dividend amount 

10 bears to the aggregate reported amount. 

11 ‘‘(II) SPECIAL RULE FOR NONCAL12 ENDAR YEAR TAXPAYERS.—In the case 

13 of any taxable year which does not 

14 begin and end in the same calendar 

15 year, if the post-December reported 

16 amount equals or exceeds the excess re17 ported amount for such taxable year, 

18 subclause (I) shall be applied by sub19 stituting ‘post-December reported 

20 amount’ for ‘aggregate reported 

21 amount’ and no excess reported 

22 amount shall be allocated to any divi23 dend paid on or before December 31 of 

24 such taxable year. 
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† HR 4337 EAS 

1 ‘‘(iv) DEFINITIONS.—For purposes of 

2 this subparagraph— 

3 ‘‘(I) REPORTED SHORT-TERM CAP4 ITAL GAIN DIVIDEND AMOUNT.—The 

5 term ‘reported short-term capital gain 

6 dividend amount’ means the amount 

7 reported to its shareholders under 

8 clause (i) as a short-term capital gain 

9 dividend. 

10 ‘‘(II) EXCESS REPORTED

11 AMOUNT.—The term ‘excess reported 

12 amount’ means the excess of the aggre13 gate reported amount over the qualified 

14 short-term gain of the company for the 

15 taxable year. 

16 ‘‘(III) AGGREGATE REPORTED

17 AMOUNT.—The term ‘aggregate re18 ported amount’ means the aggregate 

19 amount of dividends reported by the 

20 company under clause (i) as short-term 

21 capital gain dividends for the taxable 

22 year (including short-term capital 

23 gain dividends paid after the close of 

24 the taxable year described in section 

25 855). 
28 

† HR 4337 EAS 

1 ‘‘(IV) POST-DECEMBER REPORTED

2 AMOUNT.—The term ‘post-December re3 ported amount’ means the aggregate 

4 reported amount determined by taking 

5 into account only dividends paid after 

6 December 31 of the taxable year. 

7 ‘‘(v) TERMINATION.—The term ‘short8 term capital gain dividend’ shall not in9 clude any dividend with respect to’’. 

10 (g) CONFORMING AMENDMENTS.—Section 855 is 

11 amended— 

12 (1) by striking subsection (c) and redesignating 

13 subsection (d) as subsection (c), and 

14 (2) by striking ‘‘, (c) and (d)’’ in subsection (a) 

15 and inserting ‘‘and (c)’’. 

16 (h) EFFECTIVE DATE.—The amendments made by this 

17 section shall apply to taxable years beginning after the date 

18 of the enactment of this Act. 

19 (i) APPLICATION OF JGTRRA SUNSET.—Section 303 

20 of the Jobs and Growth Tax Relief Reconciliation Act of 

21 2003 shall apply to the amendments made by subpara22 graphs (B) and (D) of subsection (e)(1) to the same extent 

23 and in the same manner as section 303 of such Act applies 

24 to the amendments made by section 302 of such Act. 
29 

† HR 4337 EAS 

1 SEC. 302. EARNINGS AND PROFITS OF REGULATED INVEST2 MENT COMPANIES. 

3 (a) IN GENERAL.—Paragraph (1) of section 852(c) is 

4 amended to read as follows: 

5 ‘‘(1) TREATMENT OF NONDEDUCTIBLE ITEMS.— 

6 ‘‘(A) NET CAPITAL LOSS.—If a regulated 

7 investment company has a net capital loss for 

8 any taxable year— 

9 ‘‘(i) such net capital loss shall not be 

10 taken into account for purposes of deter11 mining the company’s earnings and profits, 

12 and 

13 ‘‘(ii) any capital loss arising on the 

14 first day of the next taxable year by reason 

15 of clause (ii) or (iii) of section 

16 1212(a)(3)(A) shall be treated as so arising 

17 for purposes of determining earnings and 

18 profits. 

19 ‘‘(B) OTHER NONDEDUCTIBLE ITEMS.— 

20 ‘‘(i) IN GENERAL.—The earnings and 

21 profits of a regulated investment company 

22 for any taxable year (but not its accumu23 lated earnings and profits) shall not be re24 duced by any amount which is not allow25 able as a deduction (other than by reason of 
30 

† HR 4337 EAS 

1 section 265 or 171(a)(2)) in computing its 

2 taxable income for such taxable year. 

3 ‘‘(ii) COORDINATION WITH TREATMENT

4 OF NET CAPITAL LOSSES.—Clause (i) shall 

5 not apply to a net capital loss to which sub6 paragraph (A) applies.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Subsection (c) of section 852 is amended by 

9 adding at the end the following new paragraph: 

10 ‘‘(4) REGULATED INVESTMENT COMPANY.—For 

11 purposes of this subsection, the term ‘regulated invest12 ment company’ includes a domestic corporation 

13 which is a regulated investment company determined 

14 without regard to the requirements of subsection (a).’’. 

15 (2) Paragraphs (1)(A) and (2)(A) of section 

16 871(k) are each amended by inserting ‘‘which meets 

17 the requirements of section 852(a) for the taxable year 

18 with respect to which the dividend is paid’’ before the 

19 period at the end. 

20 (c) EFFECTIVE DATE.—The amendments made by this 

21 section shall apply to taxable years beginning after the date 

22 of the enactment of this Act. 
31 

† HR 4337 EAS 

1 SEC. 303. PASS-THRU OF EXEMPT-INTEREST DIVIDENDS 

2 AND FOREIGN TAX CREDITS IN FUND OF 

3 FUNDS STRUCTURE. 

4 (a) IN GENERAL.—Section 852 is amended by adding 

5 at the end the following new subsection: 

6 ‘‘(g) SPECIAL RULES FOR FUND OF FUNDS.— 

7 ‘‘(1) IN GENERAL.—In the case of a qualified 

8 fund of funds— 

9 ‘‘(A) such fund shall be qualified to pay ex10 empt-interest dividends to its shareholders with11 out regard to whether such fund satisfies the re12 quirements of the first sentence of subsection 

13 (b)(5), and 

14 ‘‘(B) such fund may elect the application of 

15 section 853 (relating to foreign tax credit al16 lowed to shareholders) without regard to the re17 quirement of subsection (a)(1) thereof. 

18 ‘‘(2) QUALIFIED FUND OF FUNDS.—For purposes 

19 of this subsection, the term ‘qualified fund of funds’ 

20 means a regulated investment company if (at the 

21 close of each quarter of the taxable year) at least 50 

22 percent of the value of its total assets is represented 

23 by interests in other regulated investment compa24 nies.’’. 
32 

† HR 4337 EAS 

1 (b) EFFECTIVE DATE.—The amendment made by this 

2 section shall apply to taxable years beginning after the date 

3 of the enactment of this Act. 

4 SEC. 304. MODIFICATION OF RULES FOR SPILLOVER DIVI5 DENDS OF REGULATED INVESTMENT COMPA6 NIES. 

7 (a) DEADLINE FOR DECLARATION OF DIVIDEND.— 

8 Paragraph (1) of section 855(a) is amended to read as fol9 lows: 

10 ‘‘(1) declares a dividend before the later of— 

11 ‘‘(A) the 15th day of the 9th month fol12 lowing the close of the taxable year, or 

13 ‘‘(B) in the case of an extension of time for 

14 filing the company’s return for the taxable year, 

15 the due date for filing such return taking into 

16 account such extension, and’’. 

17 (b) DEADLINE FOR DISTRIBUTION OF DIVIDEND.— 

18 Paragraph (2) of section 855(a) is amended by striking ‘‘the 

19 first regular dividend payment’’ and inserting ‘‘the first 

20 dividend payment of the same type of dividend’’. 

21 (c) SHORT-TERM CAPITAL GAIN.—Subsection (a) of 

22 section 855 is amended by adding at the end the following: 

23 ‘‘For purposes of paragraph (2), a dividend attributable to 

24 any short-term capital gain with respect to which a notice 

25 is required under the Investment Company Act of 1940 
33 

† HR 4337 EAS 

1 shall be treated as the same type of dividend as a capital 

2 gain dividend.’’. 

3 (d) EFFECTIVE DATE.—The amendments made by this 

4 section shall apply to distributions in taxable years begin5 ning after the date of the enactment of this Act. 

6 SEC. 305. RETURN OF CAPITAL DISTRIBUTIONS OF REGU7 LATED INVESTMENT COMPANIES. 

8 (a) IN GENERAL.—Subsection (b) of section 316 is 

9 amended by adding at the end the following new paragraph: 

10 ‘‘(4) CERTAIN DISTRIBUTIONS BY REGULATED

11 INVESTMENT COMPANIES IN EXCESS OF EARNINGS

12 AND PROFITS.—In the case of a regulated investment 

13 company that has a taxable year other than a cal14 endar year, if the distributions by the company with 

15 respect to any class of stock of such company for the 

16 taxable year exceed the company’s current and accu17 mulated earnings and profits which may be used for 

18 the payment of dividends on such class of stock, the 

19 company’s current earnings and profits shall, for 

20 purposes of subsection (a), be allocated first to dis21 tributions with respect to such class of stock made 

22 during the portion of the taxable year which precedes 

23 January 1.’’. 
34 

† HR 4337 EAS 

1 (b) EFFECTIVE DATE.—The amendment made by this 

2 section shall apply to distributions made in taxable years 

3 beginning after the date of the enactment of this Act. 

4 SEC. 306. DISTRIBUTIONS IN REDEMPTION OF STOCK OF A 

5 REGULATED INVESTMENT COMPANY. 

6 (a) REDEMPTIONS TREATED AS EXCHANGES.— 

7 (1) IN GENERAL.—Subsection (b) of section 302 

8 is amended by redesignating paragraph (5) as para9 graph (6) and by inserting after paragraph (4) the 

10 following new paragraph: 

11 ‘‘(5) REDEMPTIONS BY CERTAIN REGULATED IN12 VESTMENT COMPANIES.—Except to the extent pro13 vided in regulations prescribed by the Secretary, sub14 section (a) shall apply to any distribution in redemp15 tion of stock of a publicly offered regulated investment 

16 company (within the meaning of section 67(c)(2)(B)) 

17 if— 

18 ‘‘(A) such redemption is upon the demand 

19 of the stockholder, and 

20 ‘‘(B) such company issues only stock which 

21 is redeemable upon the demand of the stock22 holder.’’. 

23 (2) CONFORMING AMENDMENT.—Subsection (a) 

24 of section 302 is amended by striking ‘‘or (4)’’ and 

25 inserting ‘‘(4), or (5)’’. 
35 

† HR 4337 EAS 

1 (b) LOSSES ON REDEMPTIONS NOT DISALLOWED FOR

2 FUND-OF-FUNDS REGULATED INVESTMENT COMPANIES.— 

3 Paragraph (3) of section 267(f) is amended by adding at 

4 the end the following new subparagraph: 

5 ‘‘(D) REDEMPTIONS BY FUND-OF-FUNDS

6 REGULATED INVESTMENT COMPANIES.—Except 

7 to the extent provided in regulations prescribed 

8 by the Secretary, subsection (a)(1) shall not 

9 apply to any distribution in redemption of stock 

10 of a regulated investment company if— 

11 ‘‘(i) such company issues only stock 

12 which is redeemable upon the demand of the 

13 stockholder, and 

14 ‘‘(ii) such redemption is upon the de15 mand of another regulated investment com16 pany.’’. 

17 (c) EFFECTIVE DATE.—The amendments made by this 

18 section shall apply to distributions after the date of the en19 actment of this Act. 

20 SEC. 307. REPEAL OF PREFERENTIAL DIVIDEND RULE FOR 

21 PUBLICLY OFFERED REGULATED INVEST22 MENT COMPANIES. 

23 (a) IN GENERAL.—Subsection (c) of section 562 is 

24 amended by striking ‘‘The amount’’ and inserting ‘‘Except 
36 

† HR 4337 EAS 

1 in the case of a publicly offered regulated investment com2 pany (as defined in section 67(c)(2)(B)), the amount’’. 

3 (b) CONFORMING AMENDMENT.—Section 562(c) is 

4 amended by inserting ‘‘(other than a publicly offered regu5 lated investment company (as so defined))’’ after ‘‘regulated 

6 investment company’’ in the second sentence thereof. 

7 (c) EFFECTIVE DATE.—The amendments made by this 

8 section shall apply to distributions in taxable years begin9 ning after the date of the enactment of this Act. 

10 SEC. 308. ELECTIVE DEFERRAL OF CERTAIN LATE-YEAR 

11 LOSSES OF REGULATED INVESTMENT COMPA12 NIES. 

13 (a) IN GENERAL.—Paragraph (8) of section 852(b) is 

14 amended to read as follows: 

15 ‘‘(8) ELECTIVE DEFERRAL OF CERTAIN LATE16 YEAR LOSSES.— 

17 ‘‘(A) IN GENERAL.—Except as otherwise 

18 provided by the Secretary, a regulated invest19 ment company may elect for any taxable year to 

20 treat any portion of any qualified late-year loss 

21 for such taxable year as arising on the first day 

22 of the following taxable year for purposes of this 

23 title. 
37 

† HR 4337 EAS 

1 ‘‘(B) QUALIFIED LATE-YEAR LOSS.—For 

2 purposes of this paragraph, the term ‘qualified 

3 late-year loss’ means— 

4 ‘‘(i) any post-October capital loss, and 

5 ‘‘(ii) any late-year ordinary loss. 

6 ‘‘(C) POST-OCTOBER CAPITAL LOSS.—For 

7 purposes of this paragraph, the term ‘post-Octo8 ber capital loss’ means the greatest of— 

9 ‘‘(i) the net capital loss attributable to 

10 the portion of the taxable year after October 

11 31, 

12 ‘‘(ii) the net long-term capital loss at13 tributable to such portion of the taxable 

14 year, or 

15 ‘‘(iii) the net short-term capital loss at16 tributable to such portion of the taxable 

17 year. 

18 ‘‘(D) LATE-YEAR ORDINARY LOSS.—For 

19 purposes of this paragraph, the term ‘late-year 

20 ordinary loss’ means the excess (if any) of— 

21 ‘‘(i) the sum of— 

22 ‘‘(I) the specified losses (as defined 

23 in section 4982(e)(5)(B)(ii)) attrib24 utable to the portion of the taxable 

25 year after October 31, plus 
38 

† HR 4337 EAS 

1 ‘‘(II) the ordinary losses not de2 scribed in subclause (I) attributable to 

3 the portion of the taxable year after 

4 December 31, over 

5 ‘‘(ii) the sum of— 

6 ‘‘(I) the specified gains (as defined 

7 in section 4982(e)(5)(B)(i)) attrib8 utable to the portion of the taxable 

9 year after October 31, plus 

10 ‘‘(II) the ordinary income not de11 scribed in subclause (I) attributable to 

12 the portion of the taxable year after 

13 December 31. 

14 ‘‘(E) SPECIAL RULE FOR COMPANIES DE15 TERMINING REQUIRED CAPITAL GAIN DISTRIBU16 TIONS ON TAXABLE YEAR BASIS.—In the case of 

17 a company to which an election under section 

18 4982(e)(4) applies— 

19 ‘‘(i) if such company’s taxable year 

20 ends with the month of November, the 

21 amount of qualified late-year losses (if any) 

22 shall be computed without regard to any in23 come, gain, or loss described in subpara24 graphs (C), (D)(i)(I), and (D)(ii)(I), and 
39 

† HR 4337 EAS 

1 ‘‘(ii) if such company’s taxable year 

2 ends with the month of December, subpara3 graph (A) shall not apply.’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Subsection (b) of section 852 is amended by 

6 striking paragraph (10). 

7 (2) Paragraph (2) of section 852(c) is amended 

8 by striking the first sentence and inserting the fol9 lowing: ‘‘For purposes of applying this chapter to dis10 tributions made by a regulated investment company 

11 with respect to any calendar year, the earnings and 

12 profits of such company shall be determined without 

13 regard to any net capital loss attributable to the por14 tion of the taxable year after October 31 and without 

15 regard to any late-year ordinary loss (as defined in 

16 subsection (b)(8)(D)).’’ 

17 (3) Subparagraph (D) of section 871(k)(2) is 

18 amended by striking the last two sentences and insert19 ing the following: ‘‘For purposes of this subpara20 graph, the net short-term capital gain of the regulated 

21 investment company shall be computed by treating 

22 any short-term capital gain dividend includible in 

23 gross income with respect to stock of another regulated 

24 investment company as a short-term capital gain.’’. 
40 

† HR 4337 EAS 

1 (c) EFFECTIVE DATE.—The amendments made by this 

2 section shall apply to taxable years beginning after the date 

3 of the enactment of this Act. 

4 SEC. 309. EXCEPTION TO HOLDING PERIOD REQUIREMENT 

5 FOR CERTAIN REGULARLY DECLARED EX6 EMPT-INTEREST DIVIDENDS. 

7 (a) IN GENERAL.—Subparagraph (E) of section 

8 852(b)(4) is amended by striking all that precedes ‘‘In the 

9 case of a regulated investment company’’ and inserting the 

10 following: 

11 ‘‘(E) EXCEPTION TO HOLDING PERIOD RE12 QUIREMENT FOR CERTAIN REGULARLY DE13 CLARED EXEMPT-INTEREST DIVIDENDS.— 

14 ‘‘(i) DAILY DIVIDEND COMPANIES.— 

15 Except as otherwise provided by regula16 tions, subparagraph (B) shall not apply 

17 with respect to a regular dividend paid by 

18 a regulated investment company which de19 clares exempt-interest dividends on a daily 

20 basis in an amount equal to at least 90 per21 cent of its net tax-exempt interest and dis22 tributes such dividends on a monthly or 

23 more frequent basis. 
41 

† HR 4337 EAS 

1 ‘‘(ii) AUTHORITY TO SHORTEN RE2 QUIRED HOLDING PERIOD WITH RESPECT

3 TO OTHER COMPANIES.—’’. 

4 (b) CONFORMING AMENDMENT.—Clause (ii) of section 

5 852(b)(4)(E), as amended by subsection (a), is amended by 

6 inserting ‘‘(other than a company described in clause (i))’’ 

7 after ‘‘regulated investment company’’. 

8 (c) EFFECTIVE DATE.—The amendments made by this 

9 section shall apply to losses incurred on shares of stock for 

10 which the taxpayer’s holding period begins after the date 

11 of the enactment of this Act. 

12 TITLE IV—MODIFICATIONS RE13 LATED TO EXCISE TAX APPLI14 CABLE TO REGULATED IN15 VESTMENT COMPANIES 

16 SEC. 401. EXCISE TAX EXEMPTION FOR CERTAIN REGU17 LATED INVESTMENT COMPANIES OWNED BY 

18 TAX EXEMPT ENTITIES. 

19 (a) IN GENERAL.—Subsection (f) of section 4982 is 

20 amended— 

21 (1) by striking ‘‘either’’ in the matter preceding 

22 paragraph (1), 

23 (2) by striking ‘‘or’’ at the end of paragraph (1), 

24 (3) by striking the period at the end of para25 graph (2), and 
42 

† HR 4337 EAS 

1 (4) by inserting after paragraph (2) the fol2 lowing new paragraphs: 

3 ‘‘(3) any other tax-exempt entity whose owner4 ship of beneficial interests in the company would not 

5 preclude the application of section 817(h)(4), or 

6 ‘‘(4) another regulated investment company de7 scribed in this subsection.’’. 

8 (b) EFFECTIVE DATE.—The amendment made by this 

9 section shall apply to calendar years beginning after the 

10 date of the enactment of this Act. 

11 SEC. 402. DEFERRAL OF CERTAIN GAINS AND LOSSES OF 

12 REGULATED INVESTMENT COMPANIES FOR 

13 EXCISE TAX PURPOSES. 

14 (a) IN GENERAL.—Subsection (e) of section 4982 is 

15 amended by striking paragraphs (5) and (6) and inserting 

16 the following new paragraphs: 

17 ‘‘(5) TREATMENT OF SPECIFIED GAINS AND

18 LOSSES AFTER OCTOBER 31 OF CALENDAR YEAR.— 

19 ‘‘(A) IN GENERAL.—Any specified gain or 

20 specified loss which (but for this paragraph) 

21 would be properly taken into account for the por22 tion of the calendar year after October 31 shall 

23 be treated as arising on January 1 of the fol24 lowing calendar year. 
43 

† HR 4337 EAS 

1 ‘‘(B) SPECIFIED GAINS AND LOSSES.—For 

2 purposes of this paragraph— 

3 ‘‘(i) SPECIFIED GAIN.—The term ‘spec4 ified gain’ means ordinary gain from the 

5 sale, exchange, or other disposition of prop6 erty (including the termination of a posi7 tion with respect to such property). Such 

8 term shall include any foreign currency 

9 gain attributable to a section 988 trans10 action (within the meaning of section 988) 

11 and any amount includible in gross income 

12 under section 1296(a)(1). 

13 ‘‘(ii) SPECIFIED LOSS.—The term 

14 ‘specified loss’ means ordinary loss from the 

15 sale, exchange, or other disposition of prop16 erty (including the termination of a posi17 tion with respect to such property). Such 

18 term shall include any foreign currency loss 

19 attributable to a section 988 transaction 

20 (within the meaning of section 988) and 

21 any amount allowable as a deduction under 

22 section 1296(a)(2). 

23 ‘‘(C) SPECIAL RULE FOR COMPANIES

24 ELECTING TO USE THE TAXABLE YEAR.—In the 

25 case of any company making an election under 
44 

† HR 4337 EAS 

1 paragraph (4), subparagraph (A) shall be ap2 plied by substituting the last day of the com3 pany’s taxable year for October 31. 

4 ‘‘(6) TREATMENT OF MARK TO MARKET GAIN.— 

5 ‘‘(A) IN GENERAL.—For purposes of deter6 mining a regulated investment company’s ordi7 nary income, notwithstanding paragraph (1)(C), 

8 each specified mark to market provision shall be 

9 applied as if such company’s taxable year ended 

10 on October 31. In the case of a company making 

11 an election under paragraph (4), the preceding 

12 sentence shall be applied by substituting the last 

13 day of the company’s taxable year for October 

14 31. 

15 ‘‘(B) SPECIFIED MARK TO MARKET PROVI16 SION.—For purposes of this paragraph, the term 

17 ‘specified mark to market provision’ means sec18 tions 1256 and 1296 and any other provision of 

19 this title (or regulations thereunder) which treats 

20 property as disposed of on the last day of the 

21 taxable year. 

22 ‘‘(7) ELECTIVE DEFERRAL OF CERTAIN ORDI23 NARY LOSSES.—Except as provided in regulations 

24 prescribed by the Secretary, in the case of a regulated 
45 

† HR 4337 EAS 

1 investment company which has a taxable year other 

2 than the calendar year— 

3 ‘‘(A) such company may elect to determine 

4 its ordinary income for the calendar year with5 out regard to any net ordinary loss (determined 

6 without regard to specified gains and losses 

7 taken into account under paragraph (5)) which 

8 is attributable to the portion of such calendar 

9 year which is after the beginning of the taxable 

10 year which begins in such calendar year, and 

11 ‘‘(B) any amount of net ordinary loss not 

12 taken into account for a calendar year by reason 

13 of subparagraph (A) shall be treated as arising 

14 on the 1st day of the following calendar year.’’. 

15 (b) EFFECTIVE DATE.—The amendments made by this 

16 section shall apply to calendar years beginning after the 

17 date of the enactment of this Act. 

18 SEC. 403. DISTRIBUTED AMOUNT FOR EXCISE TAX PUR19 POSES DETERMINED ON BASIS OF TAXES 

20 PAID BY REGULATED INVESTMENT COMPANY. 

21 (a) IN GENERAL.—Subsection (c) of section 4982 is 

22 amended by adding at the end the following new paragraph: 

23 ‘‘(4) SPECIAL RULE FOR ESTIMATED TAX PAY24 MENTS.— 
46 

† HR 4337 EAS 

1 ‘‘(A) IN GENERAL.—In the case of a regu2 lated investment company which elects the appli3 cation of this paragraph for any calendar 

4 year— 

5 ‘‘(i) the distributed amount with re6 spect to such company for such calendar 

7 year shall be increased by the amount on 

8 which qualified estimated tax payments are 

9 made by such company during such cal10 endar year, and 

11 ‘‘(ii) the distributed amount with re12 spect to such company for the following cal13 endar year shall be reduced by the amount 

14 of such increase. 

15 ‘‘(B) QUALIFIED ESTIMATED TAX PAY16 MENTS.—For purposes of this paragraph, the 

17 term ‘qualified estimated tax payments’ means, 

18 with respect to any calendar year, payments of 

19 estimated tax of a tax described in paragraph 

20 (1)(B) for any taxable year which begins (but 

21 does not end) in such calendar year.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by this 

23 section shall apply to calendar years beginning after the 

24 date of the enactment of this Act. 
47 

† HR 4337 EAS 

1 SEC. 404. INCREASE IN REQUIRED DISTRIBUTION OF CAP2 ITAL GAIN NET INCOME. 

3 (a) IN GENERAL.—Subparagraph (B) of section 

4 4982(b)(1) is amended by striking ‘‘98 percent’’ and insert5 ing ‘‘98.2 percent’’. 

6 (b) EFFECTIVE DATE.—The amendments made by this 

7 section shall apply to calendar years beginning after the 

8 date of the enactment of this Act. 

9 TITLE V—OTHER PROVISIONS 

10 SEC. 501. REPEAL OF ASSESSABLE PENALTY WITH RESPECT 

11 TO LIABILITY FOR TAX OF REGULATED IN12 VESTMENT COMPANIES. 

13 (a) IN GENERAL.—Part I of subchapter B of chapter 

14 68 is amended by striking section 6697 (and by striking 

15 the item relating to such section in the table of sections of 

16 such part). 

17 (b) CONFORMING AMENDMENT.—Section 860 is 

18 amended by striking subsection (j). 

19 (c) EFFECTIVE DATE.—The amendments made by this 

20 section shall apply to taxable years beginning after the date 

21 of the enactment of this Act. 

22 SEC. 502. MODIFICATION OF SALES LOAD BASIS DEFERRAL 

23 RULE FOR REGULATED INVESTMENT COMPA24 NIES. 

25 (a) IN GENERAL.—Subparagraph (C) of section 

26 852(f)(1) is amended by striking ‘‘subsequently acquires’’ 
48 

† HR 4337 EAS 

1 and inserting ‘‘acquires, during the period beginning on the 

2 date of the disposition referred to in subparagraph (B) and 

3 ending on January 31 of the calendar year following the 

4 calendar year that includes the date of such disposition,’’. 

5 (b) EFFECTIVE DATE.—The amendment made by this 

6 section shall apply to charges incurred in taxable years be7 ginning after the date of the enactment of this Act. 

Attest: 

Secretary. 

111TH CONGRESS 

2D SESSION H.R. 4337 

AMENDMENT