To amend the Internal Revenue Code of 1986 to expand and make permanent rules related to investment by nonresident aliens in domestic mutual funds.

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. Exemption for certain dividends paid by regulated investment companies to nonresident aliens expanded and made permanent (a) Exemptions for certain dividends made permanent (1) Interest-related dividends Subparagraph (C) of section 871(k)(1) (2) Capital gain dividends Subparagraph (C) of section 871(k)(2) of such Code is amended by striking clause (v). (b) Expansion of exemption for interest-Related dividends (1) In general Subparagraph (E) of section 871(k)(1) of such Code is amended by striking clauses (iii) and (iv) and inserting the following new clauses: (iii) Any amount referred to in subsection (i)(2)(A) (without regard to the trade or business of the regulated investment company) or in subsection (i)(2)(B). (iv) Any interest which is exempt from tax under section 103 or any other provision of law without regard to the identity of the holder. (v) Any other amount includible in gross income that is determined by reference to an interest rate and that would not be subject to withholding under section 1441 if received by a nonresident alien individual. (vi) Any amount includible in gross income from sources without the United States. (vii) Any qualified income-related dividend includible in gross income with respect to stock of another regulated investment company. . (2) Modification of exceptions Clause (i) of section 871(k)(1)(B) is amended by striking interest (other than interest described in subparagraph (E)(i) or (iii)) interest described in subparagraph (E)(ii) (and not described in subparagraph (E) (i), (iii), or (iv)) (3) Conforming amendments (A) Paragraph (1) of section 871(k) of such Code is amended— (i) by striking interest-related dividend qualified income-related dividend (ii) by striking qualified net interest income qualified net income (iii) by striking qualified interest income qualified income (iv) by striking Interest-related dividends Qualified income-related dividends (v) by striking Interest related dividend Qualified income-related dividend (vi) by striking Qualified net interest income Qualified net income (vii) by striking Qualified interest income Qualified income (B) Paragraph (1) of section 881(e) of such Code is amended— (i) by striking interest-related dividend qualified income-related dividend (ii) by striking interest received interest described in clause (ii) of section 871(k)(1)(E) (and not described in clause (i), (iii), or (iv) of such section) received (iii) by striking interest-related dividend received qualified income-related dividend received from a regulated investment company (iv) by striking clause (i) or (iii) clause (i), (iii), or (iv) (v) by striking Interest-related dividends Qualified income-related dividends (c) Effective date The amendments made by this section shall apply to dividends with respect to taxable years of regulated investment companies beginning after December 31, 2013.

Summary: Amends the Internal Revenue Code, with respect to the tax on nonresident alien individuals, to: (1) make permanent the tax exemption for interest-related dividends and short-term capital gain dividends received from a regulated investment company, and (2) expand the categories of interest-related dividends for which a tax exemption is allowed.