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‘‘(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 
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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. 
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‘‘(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-
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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-
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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 
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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-
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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— 
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(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 
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(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’’, 
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(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 
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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-
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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. 
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‘‘(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— 
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‘‘(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-
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locable to the reported short-term cap-
ital gain dividend amount is that por-
tion of the excess reported amount 
which bears the same ratio to the ex-
cess reported amount as the reported 
short-term 
capital 
gain 
dividend 
amount bears to the aggregate re-
ported 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— 
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‘‘(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 cap-
ital gain dividend. 
‘‘(II) 
EXCESS
REPORTED 
AMOUNT.—The term ‘excess reported 
amount’ means the excess of the ag-
gregate reported amount over the 
qualified short-term gain of the com-
pany 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 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
RE-
PORTED
AMOUNT.—The term ‘post- 
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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 ‘short- 
term capital gain dividend’ shall not in-
clude 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 subpara-
graphs (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. 
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SEC. 302. EARNINGS AND PROFITS OF REGULATED INVEST-
MENT COMPANIES. 
(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 deter-
mining 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 aris-
ing 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 accumu-
lated earnings and profits) shall not be re-
duced by any amount which is not allow-
able as a deduction (other than by reason 
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of section 265 or 171(a)(2)) in computing 
its taxable income for such taxable year. 
‘‘(ii) COORDINATION
WITH
TREAT-
MENT 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 in-
vestment 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’’ be-
fore 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. 
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SEC. 303. PASS-THRU OF EXEMPT-INTEREST DIVIDENDS 
AND FOREIGN TAX 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 sub-
section (b)(5), and 
‘‘(B) such fund may elect the application 
of section 853 (relating to foreign tax credit al-
lowed to shareholders) without regard to the re-
quirement of subsection (a)(1) thereof. 
‘‘(2) QUALIFIED FUND OF FUNDS.—For pur-
poses 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 rep-
resented by interests in other regulated investment 
companies.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 304. MODIFICATION OF RULES FOR SPILLOVER DIVI-
DENDS OF REGULATED INVESTMENT COMPA-
NIES. 
(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 fol-
lowing 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 no-
tice is required under the Investment Company Act of 
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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. 
SEC. 305. RETURN OF CAPITAL DISTRIBUTIONS OF REGU-
LATED INVESTMENT COMPANIES. 
(a) IN GENERAL.—Subsection (b) of section 316 is 
amended by adding at the end the following new para-
graph: 
‘‘(4) CERTAIN DISTRIBUTIONS BY REGULATED 
INVESTMENT COMPANIES IN EXCESS OF EARNINGS 
AND PROFITS.—In the case of a regulated invest-
ment 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.’’. 
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(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. 
SEC. 306. DISTRIBUTIONS IN REDEMPTION OF STOCK OF A 
REGULATED 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 re-
demption of stock of a publicly offered regulated in-
vestment 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 stock-
holder.’’. 
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(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 COMPA-
NIES.—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 de-
mand 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. 
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SEC. 307. REPEAL OF PREFERENTIAL DIVIDEND RULE FOR 
PUBLICLY OFFERED REGULATED INVEST-
MENT 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 com-
pany (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 regu-
lated investment company (as so defined))’’ after ‘‘regu-
lated 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. 
SEC. 308. ELECTIVE DEFERRAL OF CERTAIN LATE-YEAR 
LOSSES OF REGULATED INVESTMENT COM-
PANIES. 
(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 invest-
ment 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 
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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-Oc-
tober capital loss’ means the greatest of— 
‘‘(i) the net capital loss attributable to 
the portion of the taxable year after Octo-
ber 31, 
‘‘(ii) the net long-term capital loss at-
tributable 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 de-
fined in section 4982(e)(5)(B)(ii)) at-
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regulated investment company as a short-term cap-
ital 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. 
SEC. 309. EXCEPTION TO HOLDING PERIOD REQUIREMENT 
FOR CERTAIN REGULARLY DECLARED EX-
EMPT-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 RE-
QUIREMENT
FOR
CERTAIN
REGULARLY
DE-
CLARED EXEMPT-INTEREST DIVIDENDS.— 
‘‘(i) DAILY DIVIDEND COMPANIES.— 
Except as otherwise provided by regula-
tions, subparagraph (B) shall not apply 
with respect to a regular dividend paid by 
a regulated investment company which de-
clares 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. 
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‘‘(ii) AUTHORITY
TO
SHORTEN
RE-
QUIRED HOLDING PERIOD WITH RESPECT 
TO OTHER COMPANIES.—’’. 
(b) CONFORMING AMENDMENT.—Clause (ii) of sec-
tion 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. 
TITLE IV—MODIFICATIONS RE-
LATED TO EXCISE TAX APPLI-
CABLE TO REGULATED IN-
VESTMENT COMPANIES 
SEC. 401. EXCISE TAX EXEMPTION FOR CERTAIN REGU-
LATED INVESTMENT 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), 
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(3) by striking the period at the end of para-
graph (2), and 
(4) by inserting after paragraph (2) the fol-
lowing new paragraphs: 
‘‘(3) any other tax-exempt entity whose owner-
ship of beneficial interests in the company would not 
preclude the application of section 817(h)(4), or 
‘‘(4) another regulated investment company de-
scribed 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. 
SEC. 402. DEFERRAL OF CERTAIN GAINS AND LOSSES OF 
REGULATED 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 
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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 cur-
rency 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 cur-
rency loss attributable to a section 988 
transaction (within the meaning of section 
988) and any amount allowable as a de-
duction under section 1296(a)(2). 
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‘‘(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 ap-
plied by substituting the last day of the com-
pany’s taxable year for October 31. 
‘‘(6) TREATMENT
OF
MARK
TO
MARKET 
GAIN.— 
‘‘(A) IN GENERAL.—For purposes of deter-
mining a regulated investment company’s ordi-
nary 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 mak-
ing an election under paragraph (4), the pre-
ceding sentence shall be applied by substituting 
the last day of the company’s taxable year for 
October 31. 
‘‘(B) SPECIFIED MARK TO MARKET PROVI-
SION.—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 there-
under) which treats property as disposed of on 
the last day of the taxable year. 
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‘‘(7) ELECTIVE DEFERRAL OF CERTAIN ORDI-
NARY LOSSES.—Except as provided in regulations 
prescribed by the Secretary, in the case of a regu-
lated 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 with-
out 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 rea-
son 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. 
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