SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Regulated Investment Company Modernization Act of 
2010’’. 
(b) REFERENCE.—Except as otherwise expressly pro-
vided, 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 consid-
ered to be made to a section or other provision of the In-
ternal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for 
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. Income from commodities counted toward gross income test of regu-
lated investment companies. 
Sec. 202. 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 com-
pany. 
Sec. 307. Repeal of preferential dividend rule for publicly offered regulated in-
vestment 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 compa-
nies 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 regu-
lated investment companies. 
Sec. 502. Modification of sales load basis deferral rule for regulated investment 
companies. 
TITLE VI—PAYGO COMPLIANCE 
Sec. 601. Paygo compliance. 
TITLE 
I—CAPITAL 
LOSS 
CARRYOVERS OF REGULATED 
INVESTMENT COMPANIES 
SEC. 101. CAPITAL LOSS CARRYOVERS OF REGULATED IN-
VESTMENT 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 invest-
ment 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 PARA-
GRAPH 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 para-
graph (2), the amendments made by this section 
shall apply to net capital losses for taxable years be-
ginning 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 tax-
able years beginning after the date of the enactment 
of this Act.
TITLE 
II—MODIFICATION 
OF 
GROSS INCOME AND ASSET 
TESTS 
OF 
REGULATED 
IN-
VESTMENT COMPANIES 
SEC. 201. INCOME FROM COMMODITIES COUNTED TOWARD 
GROSS INCOME TEST OF REGULATED IN-
VESTMENT COMPANIES. 
(a) GROSS INCOME TEST.—Subparagraph (A) of sec-
tion 851(b)(2) is amended— 
(1) by striking ‘‘foreign currencies’’ and insert-
ing ‘‘commodities’’, and 
(2) by striking ‘‘or currencies’’ and inserting 
‘‘or commodities’’. 
(b) REPEAL OF REGULATORY AUTHORITY TO EX-
CLUDE
CERTAIN
FOREIGN
CURRENCY
GAINS
FROM 
QUALIFYING INCOME.—Subsection (b) of section 851 is 
amended by striking ‘‘For purposes of paragraph (2), the 
Secretary may by regulation exclude from qualifying in-
come foreign currency gains which are not directly related 
to the company’s principal business of investing in stock 
or securities (or options and futures with respect to stock 
or securities).’’ in the flush matter after paragraph (3). 
(c) CONFORMING AMENDMENTS.— 
(1) Subsection (h) of section 851 is amended by 
inserting ‘‘(determined by substituting ‘foreign cur-
‘‘(A) IN
GENERAL.—A corporation that 
fails to meet the requirements of subsection 
(b)(3) (other than a failure described in sub-
paragraph (B)(i)) for such quarter shall never-
theless be considered to have satisfied the re-
quirements of such subsection for such quarter 
if— 
‘‘(i) following the corporation’s identi-
fication of the failure to satisfy the re-
quirements 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 man-
ner provided by the Secretary, 
‘‘(ii) the failure to meet the require-
ments 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 speci-
fied in clause (i) within 6 months after the 
last day of the quarter in which the cor-
poration’s identification of the failure to
satisfy the requirements of such subsection 
occurred or such other time period pre-
scribed by the Secretary and in the manner 
prescribed by the Secretary, or 
‘‘(II) the requirements of such sub-
section 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 owner-
ship 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 meas-
urement 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 cor-
poration’s identification of the failure to 
satisfy the requirements of such subsection 
occurred or such other time period pre-
scribed by the Secretary and in the manner 
prescribed by the Secretary, or 
‘‘(II) the requirements of such sub-
section 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 quar-
ter, there is hereby imposed on such cor-
poration 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 cor-
poration 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 de-
ficiency 
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 corpora-
tion that fails to meet the requirement of paragraph 
(2) of subsection (b) for any taxable year shall nev-
ertheless be considered to have satisfied the require-
ment of such paragraph for such taxable year if—
‘‘(A) following the corporation’s identifica-
tion 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 will-
ful neglect. 
‘‘(2) IMPOSITION
OF
TAX
ON
FAILURES.—If 
paragraph (1) applies to a regulated investment 
company for any taxable year, there is hereby im-
posed 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 com-
pany 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 exten-
sions) of the return of tax for such taxable year is after 
the date of the enactment of this Act. 
TITLE 
III—MODIFICATION 
OF 
RULES 
RELATED 
TO 
DIVI-
DENDS 
AND 
OTHER 
DIS-
TRIBUTIONS 
SEC. 301. MODIFICATION OF DIVIDEND DESIGNATION RE-
QUIREMENTS AND 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 DIVI-
DEND.—For purposes of this part— 
‘‘(i) IN
GENERAL.—Except as pro-
vided 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 re-
spect to the company for any taxable year 
exceeds the net capital gain of the com-
pany for such taxable year, a capital gain 
dividend is the excess of— 
‘‘(I) the reported capital gain div-
idend amount, over 
‘‘(II) the excess reported amount 
which is allocable to such reported 
capital gain dividend amount. 
‘‘(iii) ALLOCATION
OF
EXCESS
RE-
PORTED AMOUNT.— 
‘‘(I) IN
GENERAL.—Except as 
provided in subclause (II), the excess 
reported amount (if any) which is al-
locable 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 aggre-
gate reported amount.
‘‘(II) SPECIAL
RULE
FOR
NON-
CALENDAR YEAR TAXPAYERS.—In the 
case of any taxable year which does 
not begin and end in the same cal-
endar year, if the post-December re-
ported amount equals or exceeds the 
excess reported amount for such tax-
able year, subclause (I) shall be ap-
plied by substituting ‘post-December 
reported amount’ for ‘aggregate re-
ported amount’ and no excess re-
ported amount shall be allocated to 
any dividend paid on or before De-
cember 31 of such taxable year. 
‘‘(iv) DEFINITIONS.—For purposes of 
this subparagraph— 
‘‘(I) REPORTED
CAPITAL
GAIN 
DIVIDEND
AMOUNT.—The term ‘re-
ported 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 ag-
gregate reported amount over the net 
capital gain of the company for the 
taxable year. 
‘‘(III) 
AGGREGATE
REPORTED 
AMOUNT.—The term ‘aggregate re-
ported 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 de-
scribed in section 855). 
‘‘(IV) 
POST-DECEMBER
RE-
PORTED
AMOUNT.—The term ‘post- 
December reported amount’ means 
the aggregate reported amount deter-
mined by taking into account only 
dividends paid after December 31 of 
the taxable year. 
‘‘(v) ADJUSTMENT FOR DETERMINA-
TIONS.—If there is an increase in the ex-
cess described in subparagraph (A) for the 
taxable year which results from a deter-
mination (as defined in section 860(e)), 
the company may, subject to the limita-
tions 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 spe-
cial 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 pro-
vided in clause (ii), an exempt-interest divi-
dend is any dividend or part thereof (other 
than a capital gain dividend) paid by a 
regulated investment company and re-
ported by the company as an exempt-inter-
est dividend in written statements fur-
nished to its shareholders. 
‘‘(ii) EXCESS REPORTED AMOUNTS.— 
If the aggregate reported amount with re-
spect 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 ex-
empt-interest dividend amount. 
‘‘(iii) ALLOCATION
OF
EXCESS
RE-
PORTED AMOUNT.— 
‘‘(I) IN
GENERAL.—Except as 
provided in subclause (II), the excess 
reported amount (if any) which is al-
locable 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-inter-
est dividend amount bears to the ag-
gregate reported amount. 
‘‘(II) SPECIAL
RULE
FOR
NON-
CALENDAR YEAR TAXPAYERS.—In the 
case of any taxable year which does 
not begin and end in the same cal-
endar year, if the post-December re-
ported amount equals or exceeds the 
excess reported amount for such tax-
able year, subclause (I) shall be ap-
plied by substituting ‘post-December 
reported amount’ for ‘aggregate re-
ported amount’ and no excess re-
ported amount shall be allocated to 
any dividend paid on or before De-
cember 31 of such taxable year. 
‘‘(iv) DEFINITIONS.—For purposes of 
this subparagraph— 
‘‘(I) REPORTED
EXEMPT-INTER-
EST
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 ag-
gregate reported amount over the ex-
empt interest of the company for the 
taxable year. 
‘‘(III) 
AGGREGATE
REPORTED 
AMOUNT.—The term ‘aggregate re-
ported 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
RE-
PORTED
AMOUNT.—The term ‘post- 
December reported amount’ means 
the aggregate reported amount deter-
mined by taking into account only 
dividends paid after December 31 of 
the taxable year. 
‘‘(V) EXEMPT
INTEREST.—The 
term ‘exempt interest’ means, with re-
spect 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 com-
pany in a written notice mailed to its share-
holders not later than 60 days after the close 
of the taxable year’’ and inserting ‘‘so reported 
by the company in a written statement fur-
nished 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 share-
holders required by subsection (c)’’ in the text 
thereof, and 
(B) by striking ‘‘AND NOTIFYING SHARE-
HOLDERS’’ 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 regu-
lated investment company in a written notice 
mailed to its shareholders not later than 60 
days after the close of its taxable year’’ and in-
serting ‘‘so reported by the regulated invest-
ment 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 share-
holders required by subsection (c)’’ in the text 
thereof, and 
(B) by striking ‘‘AND NOTIFYING SHARE-
HOLDERS’’ 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 sub-
paragraph by the regulated investment com-
pany’’ in subparagraph (A) and inserting ‘‘re-
ported by the regulated investment company as 
eligible for such deduction in written statements 
furnished to its shareholders’’, 
(B) by striking ‘‘designated by the regu-
lated investment company’’ in subparagraph 
(B)(i) and inserting ‘‘reported by the regulated 
investment company as qualified dividend in-
come in written statements furnished to its 
shareholders’’,
(C) by striking ‘‘designated’’ in subpara-
graph (C)(i) and inserting ‘‘reported’’, and 
(D) by striking ‘‘designated’’ in subpara-
graph (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 PER-
SONS.— 
(1) INTEREST-RELATED DIVIDENDS.—Subpara-
graph (C) of section 871(k)(1) is amended by strik-
ing all that precedes ‘‘any taxable year of the com-
pany beginning’’ and inserting the following: 
‘‘(C) INTEREST-RELATED DIVIDEND.—For 
purposes of this paragraph— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), an interest related divi-
dend is any dividend, or part thereof, 
which is reported by the company as an in-
terest related dividend in written state-
ments furnished to its shareholders. 
‘‘(ii) EXCESS REPORTED AMOUNTS.— 
If the aggregate reported amount with re-
spect to the company for any taxable year
exceeds the qualified net interest income of 
the company for such taxable year, an in-
terest 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 in-
terest related dividend amount. 
‘‘(iii) ALLOCATION
OF
EXCESS
RE-
PORTED AMOUNT.— 
‘‘(I) IN
GENERAL.—Except as 
provided in subclause (II), the excess 
reported amount (if any) which is al-
locable 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 re-
lated dividend amount bears to the 
aggregate reported amount. 
‘‘(II) SPECIAL
RULE
FOR
NON-
CALENDAR YEAR TAXPAYERS.—In the 
case of any taxable year which does 
not begin and end in the same cal-
endar year, if the post-December re-
ported amount equals or exceeds the 
excess reported amount for such tax-
able year, subclause (I) shall be ap-
plied by substituting ‘post-December 
reported amount’ for ‘aggregate re-
ported amount’ and no excess re-
ported amount shall be allocated to 
any dividend paid on or before De-
cember 31 of such taxable year. 
‘‘(iv) DEFINITIONS.—For purposes of 
this subparagraph— 
‘‘(I) REPORTED
INTEREST
RE-
LATED
DIVIDEND
AMOUNT.—The 
term ‘reported interest related divi-
dend amount’ means the amount re-
ported to its shareholders under 
clause (i) as an interest related divi-
dend. 
‘‘(II) 
EXCESS
REPORTED 
AMOUNT.—The term ‘excess reported 
amount’ means the excess of the ag-
gregate reported amount over the 
qualified net interest income of the 
company for the taxable year.
‘‘(III) 
AGGREGATE
REPORTED 
AMOUNT.—The term ‘aggregate re-
ported 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
RE-
PORTED
AMOUNT.—The term ‘post- 
December reported amount’ means 
the aggregate reported amount deter-
mined by taking into account only 
dividends paid after December 31 of 
the taxable year. 
‘‘(v) TERMINATION.—The term ‘inter-
est 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
DIVI-
DEND.—For purposes of this paragraph—
‘‘(i) IN
GENERAL.—Except as pro-
vided 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 divi-
dend in written statements furnished to its 
shareholders. 
‘‘(ii) EXCESS REPORTED AMOUNTS.— 
If the aggregate reported amount with re-
spect 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 cap-
ital 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
RE-
PORTED AMOUNT.— 
‘‘(I) IN
GENERAL.—Except as 
provided in subclause (II), the excess 
reported amount (if any) which is al-