‘‘(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 tax-
able year, there is hereby imposed on such 
corporation 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 
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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, the taxes im-
posed by this subparagraph shall be treat-
ed as excise taxes with respect to which the 
deficiency 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 
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(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 
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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.— 
‘‘(i) IN
GENERAL.—For purposes of 
this part, a capital gain dividend is the ex-
cess of— 
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‘‘(I) the portion of any dividend 
which is reported by the company as 
a capital gain dividend in a written 
statement furnished to its share-
holders (hereafter in this subpara-
graph referred to as the ‘reported cap-
ital gain dividend amount’), over 
‘‘(II) the excess reported amount 
(if any) which is allocable to the re-
ported capital gain dividend amount. 
‘‘(ii) 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 
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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. 
‘‘(iii) DEFINITIONS.—For purposes of 
this subparagraph— 
‘‘(I) 
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. 
‘‘(II) 
AGGREGATE
REPORTED 
AMOUNT.—The term ‘aggregate re-
ported amount’ means the aggregate 
amount of dividends reported by the 
company under clause (i)(I) as capital 
gain dividends for the taxable year 
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