I 
108TH CONGRESS 
1ST SESSION H. R. 1669
To amend the Internal Revenue Code of 1986 to provide tax treatment 
for foreign investment through a United States regulated investment 
company comparable to the tax treatment for direct foreign investment 
and investment through a foreign mutual fund. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 8, 2003
Mr. CRANE (for himself, Mr. RAMSTAD, Ms. DUNN, and Mr. SOUDER) intro-
duced the following bill; which was referred to the Committee on Ways 
and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
tax treatment for foreign investment through a United 
States regulated investment company comparable to the 
tax treatment for direct foreign investment and invest-
ment through a foreign mutual fund.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Investment Competitiveness Act’’. 
(b) AMENDMENT OF 1986 CODE.—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 considered to be made to a section 
or other provision of the Internal Revenue Code of 1986. 
SEC. 2. TREATMENT OF CERTAIN DIVIDENDS OF REGU-
LATED INVESTMENT COMPANIES. 
(a) TREATMENT OF CERTAIN DIVIDENDS.—
(1) NONRESIDENT ALIEN INDIVIDUALS.—Sec-
tion 871 (relating to tax on nonresident alien indi-
viduals) is amended by redesignating subsection (k) 
as subsection (l) and by inserting after subsection (j) 
the following new subsection: 
‘‘(k) EXEMPTION FOR CERTAIN DIVIDENDS OF REG-
ULATED INVESTMENT COMPANIES.—
‘‘(1) INTEREST-RELATED DIVIDENDS.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), no tax shall be imposed 
under paragraph (1)(A) of subsection (a) on 
any interest-related dividend received from a 
regulated investment company. 
‘‘(B) 
EXCEPTIONS.—Subparagraph 
(A) 
shall not apply—
‘‘(i) to any interest-related dividend 
received from a regulated investment com-
pany by a person to the extent such divi-
dend is attributable to interest (other than
before the date of the publication of the Sec-
retary’s determination under subsection (h)(6). 
‘‘(C) INTEREST-RELATED DIVIDEND.—For 
purposes of this paragraph, an interest-related 
dividend is any dividend (or part thereof) which 
is designated by the regulated investment com-
pany as an interest-related dividend in a writ-
ten notice mailed to its shareholders not later 
than 60 days after the close of its taxable year. 
If the aggregate amount so designated with re-
spect to a taxable year of the company (includ-
ing amounts so designated with respect to divi-
dends paid after the close of the taxable year 
described in section 855) is greater than the 
qualified net interest income of the company for 
such taxable year, the portion of each distribu-
tion which shall be an interest-related dividend 
shall be only that portion of the amounts so 
designated which such qualified net interest in-
come bears to the aggregate amount so des-
ignated. 
‘‘(D) 
QUALIFIED
NET
INTEREST
IN-
COME.—For purposes of subparagraph (C), the 
term ‘qualified net interest income’ means the 
qualified interest income of the regulated in-
vestment company reduced by the deductions 
properly allocable to such income. 
‘‘(E) QUALIFIED INTEREST INCOME.—For 
purposes of subparagraph (D), the term ‘quali-
fied interest income’ means the sum of—
‘‘(i) the following amounts derived by 
the regulated investment company from 
sources within the United States—
‘‘(I) any amount includible in 
gross income as original issue dis-
count (within the meaning of section 
1273) on an obligation payable 183 
days or less from the date of original 
issue (without regard to the period 
held by the company); 
‘‘(II) any interest includible in 
gross income (including amounts rec-
ognized as ordinary income in respect 
of original issue discount or market 
discount or acquisition discount under 
part V of subchapter P and such 
other amounts as regulations may 
provide) on an obligation which is in
registered form; except that this 
clause shall not apply to any interest
on an obligation issued by a corpora-
tion or partnership if the regulated in-
vestment company is a 10-percent 
shareholder in such corporation or 
partnership, and to any interest which 
is treated as not being portfolio inter-
est under the rules of subsection 
(h)(4); 
‘‘(III) any interest referred to in 
subsection (i)(2)(A) (without regard 
to the trade or business of the regu-
lated investment company); and 
‘‘(IV) any interest-related divi-
dend includible in gross income with 
respect to stock of another regulated 
investment company; and 
‘‘(ii) any interest derived by the regu-
lated investment company from sources 
outside the United States other than inter-
est that is subject to a tax imposed by a 
foreign jurisdiction if the amount of such 
tax is reduced (or eliminated) by a treaty 
with the United States. 
‘‘(F) 10-PERCENT
SHAREHOLDER.—For 
purposes of this paragraph, the term ‘10-per-
cent shareholder’ has the meaning given to such 
term by subsection (h)(3)(B). 
‘‘(2) SHORT-TERM CAPITAL GAIN DIVIDENDS.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), no tax shall be imposed 
under paragraph (1)(A) of subsection (a) on 
any short-term capital gain dividend received 
from a regulated investment company.
‘‘(B) EXCEPTION
FOR
ALIENS
TAXABLE 
UNDER SUBSECTION (a)(2).—Subparagraph (A) 
shall not apply in the case of any nonresident 
alien individual subject to tax under subsection 
(a)(2). 
‘‘(C) SHORT-TERM
CAPITAL
GAIN
DIVI-
DEND.—For purposes of this paragraph, a 
short-term capital gain dividend is any dividend 
(or part thereof) which is designated by the reg-
ulated investment company as a short-term cap-
ital gain dividend in a written notice mailed to 
its shareholders not later than 60 days after the 
close of its taxable year. If the aggregate 
amount so designated with respect to a taxable 
year of the company (including amounts so des-
ignated with respect to dividends paid after the 
close of the taxable year described in section
855) is greater than the qualified short-term 
gain of the company for such taxable year, the 
portion of each distribution which shall be a 
short-term capital gain dividend shall be only 
that portion of the amounts so designated 
which such qualified short-term gain bears to 
the aggregate amount so designated. 
‘‘(D) QUALIFIED SHORT-TERM GAIN.—For 
purposes of subparagraph (C), the term ‘quali-
fied short-term gain’ means the excess of the 
net short-term capital gain of the regulated in-
vestment company for the taxable year over the 
net long-term capital loss (if any) of such com-
pany for such taxable year. For purposes of this 
subparagraph—
‘‘(i) the net short-term capital gain of 
the regulated investment company shall be 
computed by treating any short-term cap-
ital gain dividend includible in gross in-
come with respect to the stock of another 
regulated investment company as a short-
term capital gain, and 
‘‘(ii) the excess of the net short-term 
capital gain for a taxable year over the net 
long-term capital loss for a taxable year (to
which an election under section 4982(e)(4) 
does not apply) shall be determined with-
out regard to any net capital loss or net 
short-term capital loss attributable to 
transactions after October 31 of such year, 
and any such net capital loss or net short-
term capital loss shall be treated as arising 
on the 1st day of the next taxable year. 
To the extent provided in regulations, clause 
(ii) shall apply also for purposes of computing 
the taxable income of the regulated investment 
company.’’. 
(2) FOREIGN CORPORATIONS.—Section 881 is 
amended by redesignating subsection (e) as sub-
section (f) and by inserting after subsection (d) the 
following new subsection: 
‘‘(e) TAX NOT TO APPLY TO CERTAIN DIVIDENDS 
OF REGULATED INVESTMENT COMPANIES.—
‘‘(1) INTEREST-RELATED DIVIDENDS.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), no tax shall be imposed 
under paragraph (1) of subsection (a) on any 
interest-related dividend (as defined in section 
871(k)(1)) received from a regulated investment 
company.