H. R. 4337—5 
‘‘(B) the failure to meet such requirement is due to 
reasonable cause and not due to willful neglect. 
‘‘(2) IMPOSITION
OF
TAX
ON
FAILURES.—If paragraph (1) 
applies to a regulated investment company for any taxable 
year, there is hereby imposed 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 company 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 extensions) 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 DIVIDENDS AND OTHER 
DISTRIBUTIONS 
SEC. 301. MODIFICATION OF DIVIDEND DESIGNATION REQUIREMENTS 
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 DIVIDEND.—For pur-
poses of this part— 
‘‘(i) IN
GENERAL.—Except as provided 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 respect 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 dividend amount, 
over 
‘‘(II) the excess reported amount which is allo-
cable to such reported capital gain dividend 
amount. 
‘‘(iii) ALLOCATION OF EXCESS REPORTED AMOUNT.— 
‘‘(I) IN GENERAL.—Except as provided in sub-
clause (II), the excess reported amount (if any) 
which is allocable to the reported capital gain divi-
dend amount is that portion of the excess reported 
amount which bears the same ratio to the excess
H. R. 4337—6 
reported amount as the reported capital gain divi-
dend amount bears to the aggregate reported 
amount. 
‘‘(II) SPECIAL
RULE
FOR
NONCALENDAR
YEAR 
TAXPAYERS.—In the case of any taxable year which 
does not begin and end in the same calendar year, 
if the post-December reported amount equals or 
exceeds the excess reported amount for such tax-
able year, subclause (I) shall be applied by sub-
stituting ‘post-December reported amount’ for 
‘aggregate reported amount’ and no excess reported 
amount shall be allocated to any dividend paid 
on or before December 31 of such taxable year. 
‘‘(iv) DEFINITIONS.—For purposes of this subpara-
graph— 
‘‘(I) 
REPORTED
CAPITAL
GAIN
DIVIDEND 
AMOUNT.—The term ‘reported capital gain dividend 
amount’ means the amount reported to its share-
holders under clause (i) as a capital gain dividend. 
‘‘(II) EXCESS
REPORTED
AMOUNT.—The term 
‘excess reported amount’ means the excess of the 
aggregate reported amount over the net capital 
gain of the company for the taxable year. 
‘‘(III) AGGREGATE
REPORTED
AMOUNT.—The 
term ‘aggregate reported amount’ means the aggre-
gate 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 described in 
section 855). 
‘‘(IV) POST-DECEMBER
REPORTED
AMOUNT.— 
The term ‘post-December reported amount’ means 
the aggregate reported amount determined by 
taking into account only dividends paid after 
December 31 of the taxable year. 
‘‘(v) ADJUSTMENT FOR DETERMINATIONS.—If there 
is an increase in the excess 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 limitations of this subparagraph, 
increase the amount of capital gain dividends reported 
under clause (i). 
‘‘(vi) SPECIAL RULE FOR LOSSES LATE IN THE CAL-
ENDAR YEAR.—For special 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 provided in clause 
(ii), an exempt-interest dividend is any dividend or 
part thereof (other than a capital gain dividend) paid 
by a regulated investment company and reported by 
the company as an exempt-interest dividend in written 
statements furnished to its shareholders.
H. R. 4337—7 
‘‘(ii) EXCESS REPORTED AMOUNTS.—If the aggregate 
reported amount with respect to the company for any 
taxable year exceeds the exempt interest of the com-
pany for such taxable year, an exempt-interest divi-
dend is the excess of— 
‘‘(I) the reported exempt-interest dividend 
amount, over 
‘‘(II) the excess reported amount which is allo-
cable to such reported exempt-interest dividend 
amount. 
‘‘(iii) ALLOCATION OF EXCESS REPORTED AMOUNT.— 
‘‘(I) IN GENERAL.—Except as provided in sub-
clause (II), the excess reported amount (if any) 
which is allocable 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-interest dividend amount bears to the 
aggregate reported amount. 
‘‘(II) SPECIAL
RULE
FOR
NONCALENDAR
YEAR 
TAXPAYERS.—In the case of any taxable year which 
does not begin and end in the same calendar year, 
if the post-December reported amount equals or 
exceeds the excess reported amount for such tax-
able year, subclause (I) shall be applied by sub-
stituting ‘post-December reported amount’ for 
‘aggregate reported amount’ and no excess reported 
amount shall be allocated to any dividend paid 
on or before December 31 of such taxable year. 
‘‘(iv) DEFINITIONS.—For purposes of this subpara-
graph— 
‘‘(I) REPORTED
EXEMPT-INTEREST
DIVIDEND 
AMOUNT.—The term ‘reported exempt-interest divi-
dend 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 
aggregate reported amount over the exempt 
interest of the company for the taxable year. 
‘‘(III) AGGREGATE
REPORTED
AMOUNT.—The 
term ‘aggregate reported amount’ means the aggre-
gate amount of dividends reported by the company 
under clause (i) as exempt-interest dividends for 
the taxable year (including exempt-interest divi-
dends paid after the close of the taxable year 
described in section 855). 
‘‘(IV) POST-DECEMBER
REPORTED
AMOUNT.— 
The term ‘post-December reported amount’ means 
the aggregate reported amount determined by 
taking into account only dividends paid after 
December 31 of the taxable year. 
‘‘(V) EXEMPT
INTEREST.—The term ‘exempt 
interest’ means, with respect to any regulated 
investment company, the excess of the amount 
of interest excludable from gross income under
H. R. 4337—8 
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 company in a 
written notice mailed to its shareholders 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 shareholders required 
by subsection (c)’’ in the text thereof, and 
(B) by striking ‘‘AND NOTIFYING SHAREHOLDERS’’ 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 regulated invest-
ment company in a written notice mailed to its share-
holders not later than 60 days after the close of its taxable 
year’’ and inserting ‘‘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 shareholders required 
by subsection (c)’’ in the text thereof, and 
(B) by striking ‘‘AND NOTIFYING SHAREHOLDERS’’ 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 subparagraph 
by the regulated investment company’’ in subparagraph 
(A) and inserting ‘‘reported by the regulated investment 
company as eligible for such deduction in written state-
ments furnished to its shareholders’’, 
(B) by striking ‘‘designated by the regulated investment 
company’’ in subparagraph (B)(i) and inserting ‘‘reported 
by the regulated investment company as qualified dividend 
income in written statements furnished to its share-
holders’’, 
(C) by striking ‘‘designated’’ in subparagraph (C)(i) and 
inserting ‘‘reported’’, and 
(D) by striking ‘‘designated’’ in subparagraph (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 PERSONS.—
H. R. 4337—9 
(1) INTEREST-RELATED
DIVIDENDS.—Subparagraph (C) of 
section 871(k)(1) is amended by striking all that precedes ‘‘any 
taxable year of the company beginning’’ and inserting the fol-
lowing: 
‘‘(C) INTEREST-RELATED
DIVIDEND.—For purposes of 
this paragraph— 
‘‘(i) IN
GENERAL.—Except as provided in clause 
(ii), an interest related dividend is any dividend, or 
part thereof, which is reported by the company as 
an interest related dividend in written statements fur-
nished to its shareholders. 
‘‘(ii) EXCESS REPORTED AMOUNTS.—If the aggregate 
reported amount with respect to the company for any 
taxable year exceeds the qualified net interest income 
of the company for such taxable year, an interest 
related dividend is the excess of— 
‘‘(I) the reported interest related dividend 
amount, over 
‘‘(II) the excess reported amount which is allo-
cable to such reported interest related dividend 
amount. 
‘‘(iii) ALLOCATION OF EXCESS REPORTED AMOUNT.— 
‘‘(I) IN GENERAL.—Except as provided in sub-
clause (II), the excess reported amount (if any) 
which is allocable 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 related dividend amount bears to the 
aggregate reported amount. 
‘‘(II) SPECIAL
RULE
FOR
NONCALENDAR
YEAR 
TAXPAYERS.—In the case of any taxable year which 
does not begin and end in the same calendar year, 
if the post-December reported amount equals or 
exceeds the excess reported amount for such tax-
able year, subclause (I) shall be applied by sub-
stituting ‘post-December reported amount’ for 
‘aggregate reported amount’ and no excess reported 
amount shall be allocated to any dividend paid 
on or before December 31 of such taxable year. 
‘‘(iv) DEFINITIONS.—For purposes of this subpara-
graph— 
‘‘(I) REPORTED
INTEREST
RELATED
DIVIDEND 
AMOUNT.—The term ‘reported interest related divi-
dend amount’ means the amount reported to its 
shareholders under clause (i) as an interest related 
dividend. 
‘‘(II) EXCESS
REPORTED
AMOUNT.—The term 
‘excess reported amount’ means the excess of the 
aggregate reported amount over the qualified net 
interest income of the company for the taxable 
year. 
‘‘(III) AGGREGATE
REPORTED
AMOUNT.—The 
term ‘aggregate reported amount’ means the aggre-
gate amount of dividends reported by the company 
under clause (i) as interest related dividends for