Expect a whole new litany of taxation as the US government, deprived of the expected windfall from Copenhagen, struggles to save itself from default b

American Scofflaw

House Ways & Means Committee Chair Charles Rangel (D-NY) and Subcommittee on Select Revenue Measures Chair Richard Neal (D-MA) yesterday introduced H.R. 4337, the Regulated Investment Company Modernization Act of 2009. The press release outlined the three goals of the legislation:

1. Modernization: The tax rules that relate to RICs date back more than a half century. Although these rules have been updated from time to time, it has been over twenty years since these rules were last revisited. In that time many changes have occurred that eliminate the need for certain rules, including rules that prevent mutual funds from earning income from commodities, rules that relate to preferential dividends, and rules that require mutual funds to send separate annual dividend designation requirements to shareholders.
2. Excise tax interactions: In 1986, Congress enacted an excise tax on the undistributed income of RICs. Over the past twenty years, mutual funds have identified a number of instances in which interactions between this excise tax and other tax rules can create problems for mutual funds and their shareholders. The bill would make a number of technical changes that would seek to remedy these interactions.
3. Corporate tax interactions: Mutual funds are subject to special tax rules that only apply to regulated investment companies under the tax code. However, mutual funds are also subject to the general corporate tax rules that apply to redemptions and dividends. Sometimes, the interaction between these two sets of rules can create problems for mutual funds and their shareholders. The bill would make a number of technical changes that would seek to remedy the adverse effects of these interactions.