Law That Simplifies Mutual Fund Tax Rules Praised by ICI

Allows RICs with shares that are redeemable upon demand to treat distributions in redemption of stock as an exchange for income tax purposes.

Section 307 -

Repeals preferential dividend rules for RICs that are publicly offered.

Section 308 -

Allows an RIC to elect to treat a post-October capital loss and any late-year ordinary loss as arising on the first day of the following taxable year.

Section 309 -

Exempts from holding period requirements applicable to RIC stock regular dividends paid by an RIC which declares exempt-interest dividends on a daily basis in an amount equal to at least 90% of its net tax-exempt interest and distributes such dividends on a monthly or more frequent basis.

Title IV – Modifications Related to Excise Tax Applicable to Regulated Investment Companies

Section 401 -

Extends the exemption from excise tax for failure to distribute taxable income of an RIC to other tax-exempt entities with an ownership interest in an RIC.

Section 402 -

Allows specified gain and loss of an RIC derived after October 31 of a calendar year to be deferred, for excise tax purposes, until January 1 of the following calendar year.

Section 403 -

Sets forth a special rule for estimated excise tax payments of RICs.

Section 404 -

Increases from 98% to 98.2% the amount of capital gain net income RICs are required to distribute.

Title V – Other Provisions

Section 501 -

Repeals the additional penalty on RICs for tax deficiencies for which a deficiency dividend has been distributed.

Section 502 -

Modifies the deferral rule for load charges in acquiring RIC stock where the taxpayer acquires the RIC stock before January 31 of the calendar year following the calendar year in which the original stock is sold.