1.
(a)This Act may be cited
as the Regulated Investment Company
Modernization Act of 2010
.
(b)Except as otherwise expressly provided,
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.
(c)The table of contents for this Act is as follows:
Sec. 1. Short title, etc.
Title I—Capital loss carryovers of regulated investment
companies
Sec. 101. Capital loss carryovers of regulated investment
companies.
Title II—Modification of gross income and asset tests of
regulated investment companies
Sec. 201. Income from commodities counted toward gross income
test of regulated investment companies.
Sec. 202. Savings provisions for failures of regulated
investment companies to satisfy gross income and asset tests.
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.
Sec. 302. Earnings and profits of regulated investment
companies.
Sec. 303. Pass-thru of exempt-interest dividends and foreign
tax credits in fund of funds structure.
Sec. 304. Modification of rules for spillover dividends of
regulated investment companies.
Sec. 305. Return of capital distributions of regulated
investment companies.
Sec. 306. Distributions in redemption of stock of a regulated
investment company.
Sec. 307. Repeal of preferential dividend rule for publicly
offered regulated investment companies.
Sec. 308. Elective deferral of certain late-year losses of
regulated investment companies.
Sec. 309. Exception to holding period requirement for certain
regularly declared exempt-interest dividends.
Title IV—Modifications related to excise tax applicable to
regulated investment companies
Sec. 401. Excise tax exemption for certain regulated investment
companies owned by tax exempt entities.
Sec. 402. Deferral of certain gains and losses of regulated
investment companies for excise tax purposes.
Sec. 403. Distributed amount for excise tax purposes determined
on basis of taxes paid by regulated investment company.
Sec. 404. Increase in required distribution of capital gain net
income.
Title V—Other provisions
Sec. 501. Repeal of assessable penalty with respect to
liability for tax of regulated investment companies.
Sec. 502. Modification of sales load basis deferral rule for
regulated investment companies.
<enum>I</enum><header>Capital loss
carryovers of regulated investment companies</header>
<section id="H275BBE8ADB0F48BB8DA117C4D6FB009F"><enum>101.</enum><header>Capital loss
carryovers of regulated investment companies</header>
<subsection id="H5F741C4B85CA43659A71CB78D90B246C"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (a) of
section 1212 is amended by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HDCD02A4F77AD494A838C3BF7D898A3A1" style="OLC">
<paragraph id="H00501E4A520B407FB264210F4DB4FC75"><enum>(3)</enum><header>Regulated
investment companies</header>
<subparagraph id="HC9A4EA7A54B24194B7808F4AED8C93BA"><enum>(A)</enum><header>In
general</header><text>If a regulated investment company has a net capital loss
for any taxable year—</text>
<clause id="HAD7D672883FD412EB95EF292F0974987"><enum>(i)</enum><text>paragraph (1)
shall not apply to such loss,</text>
</clause><clause id="HB1F4F811A3D844ABB60768078B8C5A27"><enum>(ii)</enum><text>the excess of the
net short-term capital loss over the net long-term capital gain for such year
shall be a short-term capital loss arising on the first day of the next taxable
year, and</text>
</clause><clause id="HD37408B72E894520B4C57E24D8C7FF58"><enum>(iii)</enum><text>the excess of
the net long-term capital loss over the net short-term capital gain for such
year shall be a long-term capital loss arising on the first day of the next
taxable year.</text>
</clause></subparagraph><subparagraph id="H53EFFE7003EF4EB79C987A5E20B2A6E1"><enum>(B)</enum><header>Coordination
with general rule</header><text display-inline="yes-display-inline">If a net
capital loss to which paragraph (1) applies is carried over to a taxable year
of a regulated investment company—</text>
<clause id="H8F21C77861964E76925FDE4702C93AB8"><enum>(i)</enum><header>Losses to which
this paragraph applies</header><text>Clauses (ii) and (iii) of subparagraph (A)
shall be applied without regard to any amount treated as a short-term capital
loss under paragraph (1).</text>
</clause><clause id="H7CE5EB42258043A383873AF6E1E87CB3"><enum>(ii)</enum><header>Losses to which
general rule applies</header><text>Paragraph (1) shall be applied by
substituting <quote>net capital loss for the loss year or any taxable year
thereafter (other than a net capital loss to which paragraph (3)(A)
applies)</quote> for <quote>net capital loss for the loss year or any taxable
year
thereafter</quote>.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD5A0B7F6F05C4C1BB3D78FEC41CB0D03"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="H9D9EEC64EFF34287A14FC487ABBC2820"><enum>(1)</enum><text>Subparagraph (C)
of section 1212(a)(1) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD3E3A758B1C5498FAE76F1265C90FE21" style="OLC">
<subparagraph id="H306C38E2A2F540C880AEFF0839B3FB66"><enum>(C)</enum><text display-inline="yes-display-inline">a capital loss carryover to each of the 10
taxable years succeeding the loss year, but only to the extent such loss is
attributable to a foreign expropriation
loss,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H1F7A8D14E9E048A8A5CDEAC3864ABA25"><enum>(2)</enum><text>Paragraph (10) of
section 1222 is amended by striking <quote>section 1212</quote> and inserting
<quote>section 1212(a)(1)</quote>.</text>
</paragraph></subsection><subsection id="H61041C91D0DB45DABD1FC439C92FE7AC"><enum>(c)</enum><header>Effective
date</header>
<paragraph id="HB0B1A2DFA32A45C785BA090F7CE50EFF"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the amendments made
by this section shall apply to net capital losses for taxable years beginning
after the date of the enactment of this Act.</text>
</paragraph><paragraph id="HED1D9F002ED145A5B01A5394A9481962"><enum>(2)</enum><header>Coordination
rules</header><text>Subparagraph (B) of section 1212(a)(3) of the Internal
Revenue Code of 1986, as added by this section, shall apply to taxable years
beginning after the date of the enactment of this Act.</text>
</paragraph></subsection></section><enum>II</enum><header>Modification of
gross income and asset tests of regulated investment companies</header>
<section id="HC62D8BAA64B049DB9FFB243C4D0500E6"><enum>201.</enum><header>Income from
commodities counted toward gross income test of regulated investment
companies</header>
<subsection id="H91A5C11D1E55413C818149268A0FD927"><enum>(a)</enum><header>Gross income
test</header><text display-inline="yes-display-inline">Subparagraph (A) of
section 851(b)(2) is amended—</text>
<paragraph id="H6C8E5C1579224AE99A06674EB9EFF494"><enum>(1)</enum><text>by striking
<quote>foreign currencies</quote> and inserting <quote>commodities</quote>,
and</text>
</paragraph><paragraph id="H388EBD30A4254DA5BDD969F00B16FD49"><enum>(2)</enum><text>by striking
<quote>or currencies</quote> and inserting <quote>or
commodities</quote>.</text>
</paragraph></subsection><subsection id="HBF8BFC5671E74D1DB4AE97B4F94A2594"><enum>(b)</enum><header>Repeal of
regulatory authority To exclude certain foreign currency gains from qualifying
income</header><text>Subsection (b) of section 851 is amended by striking
<quote>For purposes of paragraph (2), the Secretary may by regulation exclude
from qualifying income foreign currency gains which are not directly related to
the company’s principal business of investing in stock or securities (or
options and futures with respect to stock or securities).</quote> in the flush
matter after paragraph (3).</text>
</subsection><subsection id="H72E2FFF176484E32817E9FED7EEA00E1"><enum>(c)</enum><header>Conforming
amendments</header>
<paragraph id="HB1B05613E31849B8BB9E36DD63AC96EF"><enum>(1)</enum><text display-inline="yes-display-inline">Subsection (h) of section 851 is amended by
inserting <quote>(determined by substituting <quote>foreign currencies</quote>
for <quote>commodities</quote> therein)</quote> after <quote>subsection
(b)(2)(A)</quote>.</text>
</paragraph><paragraph id="H214340D2CD2943CAABE1369210B6FE85"><enum>(2)</enum><text display-inline="yes-display-inline">Paragraph (4) of section 7704(d) is amended
by inserting <quote>(determined by substituting <quote>foreign
currencies</quote> for <quote>commodities</quote> therein)</quote> after
<quote>section 851(b)(2)(A)</quote>.</text>
</paragraph></subsection><subsection id="HA3B5D032FA1A467D93D407D8A338B26C"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="H31DAC8350F8141BBB6E5137EC35C49B4"><enum>202.</enum><header>Savings
provisions for failures of regulated investment companies to satisfy gross
income and asset tests</header>
<subsection commented="no" display-inline="no-display-inline" id="HFE03074A935C435FB82705EB0C8E1A92"><enum>(a)</enum><header>Asset
test</header><text display-inline="yes-display-inline">Subsection (d) of
section 851 is amended—</text>
<paragraph id="H43DCF255D4D44E93ACC8AF23EBD4CB46"><enum>(1)</enum><text>by striking
<quote>A corporation which meets</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H2EBE345FD14E4328AF29234B12003A56" style="OLC">
<paragraph id="HD0002786C800469CA14270AC832E59A4"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">A corporation which
meets</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H66B9F2FCDD1B47539715C5D713C1A305"><enum>(2)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HC44F7AD1977D477B9F36DB6331CD80CD" style="OLC">
<paragraph commented="no" id="H4431BFAFA4334D5DB3F4A3E18488FFD8"><enum>(2)</enum><header>Special rules
regarding failure to satisfy requirements</header><text display-inline="yes-display-inline">If paragraph (1) does not preserve a
corporation’s status as a regulated investment company for any particular
quarter—</text>
<subparagraph commented="no" id="H2EB57B53DFBE45B8AF6CE1353E1B41F9"><enum>(A)</enum><header>In
general</header><text>A corporation that fails to meet the requirements of
subsection (b)(3) (other than a failure described in subparagraph (B)(i)) for
such quarter shall nevertheless be considered to have satisfied the
requirements of such subsection for such quarter if—</text>
<clause commented="no" id="HA530113A614B4B2290A758FBD63AA791"><enum>(i)</enum><text>following the
corporation’s identification of the failure to satisfy the requirements of such
subsection for such quarter, a description of each asset that causes the
corporation to fail to satisfy the requirements of such subsection at the close
of such quarter is set forth in a schedule for such quarter filed in the manner
provided by the Secretary,</text>
</clause><clause commented="no" id="HE551AE50D73A440ABC477D1F1C4CBED8"><enum>(ii)</enum><text>the failure to
meet the requirements of such subsection for such quarter is due to reasonable
cause and not due to willful neglect, and</text>
</clause><clause commented="no" id="H05A563E7E73347FFAEDE1AD019E222CC"><enum>(iii)</enum><subclause commented="no" display-inline="yes-display-inline" id="H8A4BC6C325A049DC8A4B7866702BEF80"><enum>(I)</enum><text>the corporation disposes
of the assets set forth on the schedule specified in clause (i) within 6 months
after the last day of the quarter in which the corporation’s identification of
the failure to satisfy the requirements of such subsection occurred or such
other time period prescribed by the Secretary and in the manner prescribed by
the Secretary, or</text>
</subclause><subclause id="HC902EC0EE2EE49D891255E263D5001D4" indent="up1"><enum>(II)</enum><text>the requirements of such subsection are
otherwise met within the time period specified in subclause (I).</text>
</subclause></clause></subparagraph><subparagraph commented="no" id="HD3BBD1261098405AA9C78A23212D3D5D"><enum>(B)</enum><header>Rule for certain
de minimis failures</header><text>A corporation that fails to meet the
requirements of subsection (b)(3) for such quarter shall nevertheless be
considered to have satisfied the requirements of such subsection for such
quarter if—</text>
<clause commented="no" id="H135D55C88D874B05ACEB02E117F146B4"><enum>(i)</enum><text>such failure is
due to the ownership of assets the total value of which does not exceed the
lesser of—</text>
<subclause id="HDE94CB21BD2F4128AA1A840D6EEE5F56"><enum>(I)</enum><text>1 percent of the
total value of the corporation’s assets at the end of the quarter for which
such measurement is done, or</text>
</subclause><subclause id="H8C1B437B758C41C49EC89E3B873065C5"><enum>(II)</enum><text>$10,000,000,
and</text>
</subclause></clause><clause commented="no" id="H0790376BFE2F4E8D84B4E3E052C0EDB6"><enum>(ii)</enum><subclause commented="no" display-inline="yes-display-inline" id="HCFD1D88058E94567848F596CFB353AD5"><enum>(I)</enum><text>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 corporation’s identification of the failure to satisfy
the requirements of such subsection occurred or such other time period
prescribed by the Secretary and in the manner prescribed by the Secretary,
or</text>
</subclause><subclause id="H64DD6EEFBEC940828AFE09AD21EE2721" indent="up1"><enum>(II)</enum><text>the requirements of such subsection are
otherwise met within the time period specified in subclause (I).</text>
</subclause></clause></subparagraph><subparagraph commented="no" id="H8C3986C24F2740D390C6949BED664934"><enum>(C)</enum><header>Tax</header>
<clause commented="no" id="H68ABE2FD15DD42638C3558185E7B1D40"><enum>(i)</enum><header>Tax
imposed</header><text>If subparagraph (A) applies to a corporation for any
quarter, there is hereby imposed on such corporation a tax in an amount equal
to the greater of—</text>
<subclause commented="no" id="H35ACA8C6687F43358D30AC26D7398BF3"><enum>(I)</enum><text>$50,000, or</text>
</subclause><subclause commented="no" id="HC31EB4FA8B0042A099FE90206744E8DB"><enum>(II)</enum><text>the amount
determined (pursuant to regulations promulgated by the Secretary) by
multiplying the net income generated by the assets 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.</text>
</subclause></clause><clause commented="no" id="H414CEB733D6E4358AC13F717545B7ED0"><enum>(ii)</enum><header>Period</header><text>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 corporation disposes of such assets or
the end of the first quarter when there is no longer a failure to satisfy such
subsection.</text>
</clause><clause commented="no" id="HCAE124216F4E40E2A057D0E03F7AC5B8"><enum>(iii)</enum><header>Administrative
provisions</header><text>For purposes of subtitle F, a tax imposed by this
subparagraph shall be treated as an excise tax with respect to which the
deficiency procedures of such subtitle
apply.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HFCF19BFABA4A4DD18B6CA53E10B86721"><enum>(b)</enum><header>Gross income
test</header><text display-inline="yes-display-inline">Section 851 is amended
by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HFAB199E0664C476F95F150C48E28EF28" style="OLC">
<subsection id="H3D03C705CAE8433AAAE63BF53F3218F3"><enum>(i)</enum><header>Failure To
satisfy gross income test</header>
<paragraph id="H831967D7B55D4B10ADF5C014E1F871DC"><enum>(1)</enum><header>Disclosure
requirement</header><text display-inline="yes-display-inline">A corporation
that fails to meet the requirement of paragraph (2) of subsection (b) for any
taxable year shall nevertheless be considered to have satisfied the requirement
of such paragraph for such taxable year if—</text>
<subparagraph id="H32B4FDFBCAE9448C999E62BB06917CC5"><enum>(A)</enum><text>following the
corporation’s identification 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</text>
</subparagraph><subparagraph id="HB9EBC61C865E41E4A4AF55F0AB3C4811"><enum>(B)</enum><text>the failure to
meet such requirement is due to reasonable cause and not due to willful
neglect.</text>
</subparagraph></paragraph><paragraph id="H208B5F38B998415A8580DC63F7949037"><enum>(2)</enum><header>Imposition of
tax on failures</header><text>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—</text>
<subparagraph id="HA6777318F86A461C820FF68E3C2CF005"><enum>(A)</enum><text>the gross income
of such company which is not derived from sources referred to in subsection
(b)(2), over</text>
</subparagraph><subparagraph id="H1471AB8D7025426EA7D99AF416C611C9"><enum>(B)</enum><text><fraction>1/9</fraction>
of the gross income of such company which is derived from such
sources.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H13C1892EF03B4D009C94BF051A31315F"><enum>(c)</enum><header>Deduction of
taxes paid from investment company taxable income</header><text>Paragraph (2)
of section 852(b) is amended by adding at the end the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HC178C516C0AD4092A7D0E056119F5A0E" style="OLC">
<subparagraph id="H4DDAB7C878DA4CBE833519EC2C3F670F"><enum>(G)</enum><text display-inline="yes-display-inline">There shall be deducted an amount equal to
the tax imposed by subsections (d)(2) and (i) of section 851 for the taxable
year.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD1FDBFB837A74167B97ABB890E4DB673"><enum>(d)</enum><header>Effective
date</header><text>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.</text>
</subsection></section><enum>III</enum><header>Modification of
rules related to dividends and other distributions</header>
<section id="HF873174FD6E847D9A78C0A49DE04BBCE"><enum>301.</enum><header>Modification of
dividend designation requirements and allocation rules for regulated investment
companies</header>
<subsection id="H0D4BB008B3DD4D31870B575B7F09E84D"><enum>(a)</enum><header>Capital gain
dividends</header>
<paragraph display-inline="no-display-inline" id="HD0A577858DC041D1A9395BF153D595E1"><enum>(1)</enum><header>In
general</header><text>Subparagraph (C) of section 852(b)(3) is amended to read
as follows:</text>
<quoted-block display-inline="no-display-inline" id="H779441E0C4A04F6F8B1D21983B1B2FEC" style="OLC">
<subparagraph display-inline="no-display-inline" id="H21AF2383395A4F878AA4B58A62302ED9"><enum>(C)</enum><header>Definition of
capital gain dividend</header><text display-inline="yes-display-inline">For
purposes of this part—</text>
<clause id="H728F64F28D754B379235FF0AFC8D51FF"><enum>(i)</enum><header>In
general</header><text display-inline="yes-display-inline">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.</text>
</clause><clause id="H769F68DABA9D405C9C627BF3D23E1FDF"><enum>(ii)</enum><header>Excess reported
amounts</header><text>If the aggregate reported amount with respect to the
company for any taxable year exceeds the net capital gain of the company for
such taxable year, a capital gain dividend is the excess of—</text>
<subclause id="H391616F6CBE34494B7B0607FF1C0BFCC"><enum>(I)</enum><text>the reported
capital gain dividend amount, over</text>
</subclause><subclause id="HBE2EDC9B100446538E86F118F12A9070"><enum>(II)</enum><text>the excess
reported amount which is allocable to such reported capital gain dividend
amount.</text>
</subclause></clause><clause id="H969510680FB04EC8A6330D88AD4EA51E"><enum>(iii)</enum><header>Allocation of
excess reported amount</header>
<subclause id="H55950E77A7A24A628A8EB68E7553C6C5"><enum>(I)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
subclause (II), the excess reported amount (if any) which is allocable 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 aggregate reported amount.</text>
</subclause><subclause id="H7EA0D05521AC4699A48E36F0886951D1"><enum>(II)</enum><header>Special rule
for noncalendar year taxpayers</header><text>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 taxable
year, subclause (I) shall be applied by substituting <quote>post-December
reported amount</quote> for <quote>aggregate reported amount</quote> and no
excess reported amount shall be allocated to any dividend paid on or before
December 31 of such taxable year.</text>
</subclause></clause><clause id="H17141CCF2A93495A87272F2839551A4E"><enum>(iv)</enum><header>Definitions</header><text>For
purposes of this subparagraph—</text>
<subclause id="HAD693E17D5FF429582FEB71C8A31A842"><enum>(I)</enum><header>Reported capital
gain dividend amount</header><text>The term <quote>reported capital gain
dividend amount</quote> means the amount reported to its shareholders under
clause (i) as a capital gain dividend.</text>
</subclause><subclause id="H426B6756D18A493195D2671AFE278687"><enum>(II)</enum><header>Excess reported
amount</header><text>The term <term>excess reported amount</term> means the
excess of the aggregate reported amount over the net capital gain of the
company for the taxable year.</text>
</subclause><subclause id="H68C2B534C91546C5A50E3A7623C73764"><enum>(III)</enum><header>Aggregate
reported amount</header><text>The term <term>aggregate reported amount</term>
means the aggregate 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).</text>
</subclause><subclause id="HC130C4AEAB8B47E2905B3F519A1952FC"><enum>(IV)</enum><header>Post-December
reported amount</header><text>The term <term>post-December reported
amount</term> means the aggregate reported amount determined by taking into
account only dividends paid after December 31 of the taxable year.</text>
</subclause></clause><clause commented="no" id="H4C39AB366E6E4534904BCF1B35772644"><enum>(v)</enum><header>Adjustment for
determinations</header><text>If there is an increase in the excess described in
subparagraph (A) for the taxable year which results from a determination (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).</text>
</clause><clause id="HECE975596C6E40A28F0B2FAF51C44BB1"><enum>(vi)</enum><header>Special rule
for losses late in the calendar year</header><text display-inline="yes-display-inline">For special rule for certain losses after
October 31, see paragraph
(8).</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H1B283B8C618D4CA0B44CB7DE7237C1F7"><enum>(2)</enum><header>Conforming
amendment</header><text>Subparagraph (B) of section 860(f)(2) is amended by
inserting <quote>or reported (as the case may be)</quote> after
<quote>designated</quote>.</text>
</paragraph></subsection><subsection id="HC682647FD191476C8F8E9F940662BB25"><enum>(b)</enum><header>Exempt-Interest
dividends</header><text>Subparagraph (A) of section 852(b)(5) is amended to
read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H29D9C2A628804BFD94E0B48C4318934B" style="OLC">
<subparagraph id="HB3A9CB45D04D43D28F5825E726C60595"><enum>(A)</enum><header>Definition of
exempt-interest dividend</header>
<clause display-inline="no-display-inline" id="H6A3B6A82117B4AC3BF4FD6A43BE37B03"><enum>(i)</enum><header>In
general</header><text display-inline="yes-display-inline">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.</text>
</clause><clause id="H072C5859C9074BDD9C98D257E2190372"><enum>(ii)</enum><header>Excess reported
amounts</header><text>If the aggregate reported amount with respect to the
company for any taxable year exceeds the exempt interest of the company for
such taxable year, an exempt-interest dividend is the excess of—</text>
<subclause id="HC949BE83E1B14A8EB2BE85B6662E8B3A"><enum>(I)</enum><text>the reported
exempt-interest dividend amount, over</text>
</subclause><subclause id="H0B40D4B70E7D48E2BA0135A616E66949"><enum>(II)</enum><text>the excess
reported amount which is allocable to such reported exempt-interest dividend
amount.</text>
</subclause></clause><clause id="H21A7DB4980B746ADB8551F6E677746F8"><enum>(iii)</enum><header>Allocation of
excess reported amount</header>
<subclause id="HACF7B97DDE9142628C71ADB5998AC2D9"><enum>(I)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
subclause (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.</text>
</subclause><subclause id="H2439E85EEAC94BAFAD0161C9027B9B55"><enum>(II)</enum><header>Special rule
for noncalendar year taxpayers</header><text>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 taxable
year, subclause (I) shall be applied by substituting <quote>post-December
reported amount</quote> for <quote>aggregate reported amount</quote> and no
excess reported amount shall be allocated to any dividend paid on or before
December 31 of such taxable year.</text>
</subclause></clause><clause id="H2F6036E20D3D41F6B466CF4A29316302"><enum>(iv)</enum><header>Definitions</header><text>For
purposes of this subparagraph—</text>
<subclause display-inline="no-display-inline" id="H36F48CD83D9A49FFA9EE526465D9EE17"><enum>(I)</enum><header>Reported
exempt-interest dividend amount</header><text>The term <quote>reported
exempt-interest dividend amount</quote> means the amount reported to its
shareholders under clause (i) as an exempt-interest dividend.</text>
</subclause><subclause id="H9355D46084A442CB9D1C5E32BC5E142A"><enum>(II)</enum><header>Excess reported
amount</header><text>The term <term>excess reported amount</term> means the
excess of the aggregate reported amount over the exempt interest of the company
for the taxable year.</text>
</subclause><subclause id="HB8C8CE4FA5944C5BA8832A10E6D7970F"><enum>(III)</enum><header>Aggregate
reported amount</header><text>The term <term>aggregate reported amount</term>
means the aggregate amount of dividends reported by the company under clause
(i) as exempt-interest dividends for the taxable year (including
exempt-interest dividends paid after the close of the taxable year described in
section 855).</text>
</subclause><subclause id="H01877134F1CE445B8DEBBF77F767BFE8"><enum>(IV)</enum><header>Post-December
reported amount</header><text>The term <term>post-December reported
amount</term> means the aggregate reported amount determined by taking into
account only dividends paid after December 31 of the taxable year.</text>
</subclause><subclause id="H9E422E03D79643C9B8BEC2CEE6384C76"><enum>(V)</enum><header>Exempt
interest</header><text>The term <term>exempt interest</term> means, with
respect to any regulated investment company, the excess of the amount of
interest excludable from gross income under section 103(a) over the amounts
disallowed as deductions under sections 265 and
171(a)(2).</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H11E0C3C137B34D49AEC30BE87D6941B4"><enum>(c)</enum><header>Foreign tax
credits</header>
<paragraph id="HA394E33415D94CF7AE8D0EB13A37B59C"><enum>(1)</enum><header>In
general</header><text>Subsection (c) of section 853 is amended—</text>
<subparagraph id="H1D4C94C5E3DE42929243E312639F7F8F"><enum>(A)</enum><text>by striking
<quote>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</quote>
and inserting <quote>so reported by the company in a written statement
furnished to such shareholder</quote>, and</text>
</subparagraph><subparagraph id="HD48730DBE448405AA92C12ECE57A2A24"><enum>(B)</enum><text>by striking
<quote><header-in-text level="subsection" style="OLC">Notice</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="subsection" style="OLC">Statements</header-in-text></quote>.</text>
</subparagraph></paragraph><paragraph id="HD44818A3AC8B4B9393E38C4259A4F61F"><enum>(2)</enum><header>Conforming
amendments</header><text>Subsection (d) of section 853 is amended—</text>
<subparagraph id="HBA24722433DC46758831DD89A35CD3F9"><enum>(A)</enum><text>by striking
<quote>and the notice to shareholders required by subsection (c)</quote> in the
text thereof, and</text>
</subparagraph><subparagraph id="H603DFA00CD7449FDA7B830B4A33BD3D4"><enum>(B)</enum><text>by striking
<quote><header-in-text level="subsection" style="OLC">and notifying
shareholders</header-in-text></quote> in the heading thereof.</text>
</subparagraph></paragraph></subsection><subsection id="H2F84A90A62CD4935B92AB114DAE00F96"><enum>(d)</enum><header>Credits for tax
credit bonds</header>
<paragraph id="H263017732EF849F5A488A14C1A674788"><enum>(1)</enum><header>In
general</header><text>Subsection (c) of section 853A is amended—</text>
<subparagraph id="HE23E6D72FD3540E8B7893B4B9ECB8213"><enum>(A)</enum><text>by striking
<quote>so designated by the regulated investment company in a written notice
mailed to its shareholders not later than 60 days after the close of its
taxable year</quote> and inserting <quote>so reported by the regulated
investment company in a written statement furnished to such
shareholder</quote>, and</text>
</subparagraph><subparagraph id="H6AC297759E1945D1AB02045D73755C7B"><enum>(B)</enum><text>by striking
<quote><header-in-text level="subsection" style="OLC">Notice</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="subsection" style="OLC">Statements</header-in-text></quote>.</text>
</subparagraph></paragraph><paragraph id="HA95E7CD314D74B71B2A70165B17ED708"><enum>(2)</enum><header>Conforming
amendments</header><text>Subsection (d) of section 853A is amended—</text>
<subparagraph id="H594738EE85C946618DFFC9C5A7CFD24D"><enum>(A)</enum><text>by striking
<quote>and the notice to shareholders required by subsection (c)</quote> in the
text thereof, and</text>
</subparagraph><subparagraph id="HD4EDE61A542B4B209F2D80897CA89F18"><enum>(B)</enum><text>by striking
<quote><header-in-text level="subsection" style="OLC">and notifying
shareholders</header-in-text></quote> in the heading thereof.</text>
</subparagraph></paragraph></subsection><subsection id="HA787B430AF5840FEAEAF8F713347EFCA"><enum>(e)</enum><header>Dividend
received deduction, etc</header>
<paragraph id="HB2BB34423E684039AA9A723A9C0A50C6"><enum>(1)</enum><header>In
general</header><text>Paragraph (1) of section 854(b) is amended—</text>
<subparagraph id="H60D846E7196F469181AB9535DD8BCF74"><enum>(A)</enum><text>by striking
<quote>designated under this subparagraph by the regulated investment
company</quote> in subparagraph (A) and inserting <quote>reported by the
regulated investment company as eligible for such deduction in written
statements furnished to its shareholders</quote>,</text>
</subparagraph><subparagraph id="HF3029D599218470AB3D894FE0F2747EF"><enum>(B)</enum><text>by striking
<quote>designated by the regulated investment company</quote> in subparagraph
(B)(i) and inserting <quote>reported by the regulated investment company as
qualified dividend income in written statements furnished to its
shareholders</quote>,</text>
</subparagraph><subparagraph commented="no" id="H9285455D008849359FE46E1404058D72"><enum>(C)</enum><text>by striking
<quote>designated</quote> in subparagraph (C)(i) and inserting
<quote>reported</quote>, and</text>
</subparagraph><subparagraph commented="no" id="H6794A5EEBF9A46D298A9AEEF3A4037A3"><enum>(D)</enum><text>by striking
<quote>designated</quote> in subparagraph (C)(ii) and inserting
<quote>reported</quote>.</text>
</subparagraph></paragraph><paragraph id="H6D959C9F32C04318A1A86D7422CD6A50"><enum>(2)</enum><header>Conforming
amendments</header><text>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.</text>
</paragraph></subsection><subsection id="H61C448316A204892A8204D13EEADDD38"><enum>(f)</enum><header>Dividends paid
to certain foreign persons</header>
<paragraph id="HCF7A049F59C44E1FB58FDC00F798DFE9"><enum>(1)</enum><header>Interest-related
dividends</header><text>Subparagraph (C) of section 871(k)(1) is amended by
striking all that precedes <quote>any taxable year of the company
beginning</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H9D46F54883BA403F842A8B3ED7D96863" style="OLC">
<subparagraph id="H0A00067B68524C3AB83EF0FF4BEB8C29"><enum>(C)</enum><header>Interest-related
dividend</header><text display-inline="yes-display-inline">For purposes of this
paragraph—</text>
<clause display-inline="no-display-inline" id="H18FB03ED874D4D14882B2593B1A3AB90"><enum>(i)</enum><header>In
general</header><text display-inline="yes-display-inline">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 furnished to its shareholders.</text>
</clause><clause id="HA166F128CAF14E2987B04EE831D90E77"><enum>(ii)</enum><header>Excess reported
amounts</header><text display-inline="yes-display-inline">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—</text>
<subclause id="H74C8E6211C4841ABA658F1432E0889EE"><enum>(I)</enum><text>the reported
interest related dividend amount, over</text>
</subclause><subclause id="H84CAC32D7902453281F78376E2F886F8"><enum>(II)</enum><text>the excess
reported amount which is allocable to such reported interest related dividend
amount.</text>
</subclause></clause><clause id="HC252615FC8A04838B03A1DC03D36556C"><enum>(iii)</enum><header>Allocation of
excess reported amount</header>
<subclause id="H1DC0724ABF424AE68B235E2D67AAA6EF"><enum>(I)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
subclause (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.</text>
</subclause><subclause id="HD88D769A497740518A0885EA8163DE6A"><enum>(II)</enum><header>Special rule
for noncalendar year taxpayers</header><text>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 taxable
year, subclause (I) shall be applied by substituting <quote>post-December
reported amount</quote> for <quote>aggregate reported amount</quote> and no
excess reported amount shall be allocated to any dividend paid on or before
December 31 of such taxable year.</text>
</subclause></clause><clause id="H0E2486C4003D47B9A3DA1289C752919E"><enum>(iv)</enum><header>Definitions</header><text>For
purposes of this subparagraph—</text>
<subclause display-inline="no-display-inline" id="HDEF6BCD4679747079149671EE773EE30"><enum>(I)</enum><header>Reported
interest related dividend amount</header><text>The term <quote>reported
interest related dividend amount</quote> means the amount reported to its
shareholders under clause (i) as an interest related dividend.</text>
</subclause><subclause id="H9EDCB6E101C1418FAD0CC3D9AD3D5C90"><enum>(II)</enum><header>Excess reported
amount</header><text>The term <term>excess reported amount</term> means the
excess of the aggregate reported amount over the qualified net interest income
of the company for the taxable year.</text>
</subclause><subclause id="HD6308337D3EA417886EE75F4CD43F021"><enum>(III)</enum><header>Aggregate
reported amount</header><text>The term <term>aggregate reported amount</term>
means the aggregate amount of dividends reported by the company under clause
(i) as interest related dividends for the taxable year (including interest
related dividends paid after the close of the taxable year described in section
855).</text>
</subclause><subclause id="H56262B73085D40ECB3A36218E4F2836D"><enum>(IV)</enum><header>Post-December
reported amount</header><text>The term <term>post-December reported
amount</term> means the aggregate reported amount determined by taking into
account only dividends paid after December 31 of the taxable year.</text>
</subclause></clause><clause id="H903F1375D5D04B53BFCE157688671DB9"><enum>(v)</enum><header>Termination</header><text>The
term <term>interest related dividend</term> shall not include any dividend with
respect
to</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H3454ACCFF2BD4471B840098ED53E6BD5"><enum>(2)</enum><header>Short-term
capital gain dividends</header><text>Subparagraph (C) of section 871(k)(2) is
amended by striking all that precedes <quote>any taxable year of the company
beginning</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H4E559C7342B448999BB9F00E90BCAEC9" style="OLC">
<subparagraph id="HA10AB8527A8D480183E86FD29E55EB71"><enum>(C)</enum><header>Short-term
capital gain dividend</header><text display-inline="yes-display-inline">For
purposes of this paragraph—</text>
<clause display-inline="no-display-inline" id="HA59AB697CB9C474F9043494CDD7E3EA4"><enum>(i)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
clause (ii), the term <quote>short-term capital gain dividend</quote> means any
dividend, or part thereof, which is reported by the company as a short-term
capital gain dividend in written statements furnished to its
shareholders.</text>
</clause><clause id="H10E251BF18FF4346A306463E272A87C9"><enum>(ii)</enum><header>Excess reported
amounts</header><text display-inline="yes-display-inline">If the aggregate
reported amount with respect to the company for any taxable year exceeds the
qualified short-term gain of the company for such taxable year, the term
<quote>short-term capital gain dividend</quote> means the excess of—</text>
<subclause id="HA86A91B1710846319BD38E6CB902CDBE"><enum>(I)</enum><text>the reported
short-term capital gain dividend amount, over</text>
</subclause><subclause id="HC487F2E1BE8B412CAA98C359EB15B7FF"><enum>(II)</enum><text>the excess
reported amount which is allocable to such reported short-term capital gain
dividend amount.</text>
</subclause></clause><clause id="H94A7BF87AB2C49B999FAC1BB2D45626F"><enum>(iii)</enum><header>Allocation of
excess reported amount</header>
<subclause id="H5F4432844E7F4E6A8AF23C9B9182F96A"><enum>(I)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
subclause (II), the excess reported amount (if any) which is allocable to the
reported short-term 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 short-term capital gain dividend amount bears to the aggregate
reported amount.</text>
</subclause><subclause id="HA85F28B4A29F46DCB6C97EDDD2D8D6A6"><enum>(II)</enum><header>Special rule
for noncalendar year taxpayers</header><text>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 taxable
year, subclause (I) shall be applied by substituting <quote>post-December
reported amount</quote> for <quote>aggregate reported amount</quote> and no
excess reported amount shall be allocated to any dividend paid on or before
December 31 of such taxable year.</text>
</subclause></clause><clause id="H994D4F1D4DD44749BEB14EDF5F588460"><enum>(iv)</enum><header>Definitions</header><text>For
purposes of this subparagraph—</text>
<subclause display-inline="no-display-inline" id="H6D4487BEA10D41B58849BBA941269854"><enum>(I)</enum><header>Reported
short-term capital gain dividend amount</header><text>The term <quote>reported
short-term capital gain dividend amount</quote> means the amount reported to
its shareholders under clause (i) as a short-term capital gain dividend.</text>
</subclause><subclause id="H3A3CC43C6A2B45D88257598D2079DF81"><enum>(II)</enum><header>Excess reported
amount</header><text>The term <term>excess reported amount</term> means the
excess of the aggregate reported amount over the qualified short-term gain of
the company for the taxable year.</text>
</subclause><subclause id="HFF9260C1DC644B0AB3E15F9C8DEADED7"><enum>(III)</enum><header>Aggregate
reported amount</header><text>The term <term>aggregate reported amount</term>
means the aggregate amount of dividends reported by the company under clause
(i) as short-term capital gain dividends for the taxable year (including
short-term capital gain dividends paid after the close of the taxable year
described in section 855).</text>
</subclause><subclause id="H073B1CFC271C4CA2995A521DA58C28C9"><enum>(IV)</enum><header>Post-December
reported amount</header><text>The term <term>post-December reported
amount</term> means the aggregate reported amount determined by taking into
account only dividends paid after December 31 of the taxable year.</text>
</subclause></clause><clause id="H83041AAB084A4406B49DC3ADADF24270"><enum>(v)</enum><header>Termination</header><text>The
term <term>short-term capital gain dividend</term> shall not include any
dividend with respect
to</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H176E0EBB5277445E8B895CA64228FCDA"><enum>(g)</enum><header>Conforming
amendments</header><text>Section 855 is amended—</text>
<paragraph id="HB895F7D3BE8F4578AAABB6E64766938A"><enum>(1)</enum><text>by striking
subsection (c) and redesignating subsection (d) as subsection (c), and</text>
</paragraph><paragraph id="H0A5D31040EA24A56B9F709D14E258552"><enum>(2)</enum><text>by striking
<quote>, (c) and (d)</quote> in subsection (a) and inserting <quote>and
(c)</quote>.</text>
</paragraph></subsection><subsection id="H277072ADC0774814BA22FCE94B8E9E69"><enum>(h)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to taxable years beginning after the date of the
enactment of this Act.</text>
</subsection><subsection id="H9F50065F8E634DD09F0BF2026392E627"><enum>(i)</enum><header>Application of
JGTRRA sunset</header><text>Section 303 of the Jobs and Growth Tax Relief
Reconciliation Act of 2003 shall apply to the amendments made by subparagraphs
(B) and (D) of subsection (e)(1) to the same extent and in the same manner as
section 303 of such Act applies to the amendments made by section 302 of such
Act.</text>
</subsection></section><section id="HFBE172BB1A8E45479B4F0D3995ED9778"><enum>302.</enum><header>Earnings and
profits of regulated investment companies</header>
<subsection id="H1448CE1E11C74118AC8837B0A386CCFA"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Paragraph (1) of
section 852(c) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HBA1B1C4E225C490CB5B795052B71288B" style="OLC">
<paragraph id="HF5BA63B9291341FDA254C5FC1F0BE457"><enum>(1)</enum><header>Treatment of
nondeductible items</header>
<subparagraph id="H24FAC57BEF9E453F93A2C082356DE7AA"><enum>(A)</enum><header>Net capital
loss</header><text display-inline="yes-display-inline">If a regulated
investment company has a net capital loss for any taxable year—</text>
<clause id="HF0442B4A713341538B194A7C6354F86F"><enum>(i)</enum><text>such net capital
loss shall not be taken into account for purposes of determining the company’s
earnings and profits, and</text>
</clause><clause id="H2A956CF49C6942A4B59A8E5FA58D8CF9"><enum>(ii)</enum><text>any capital loss
arising on the first day of the next taxable year by reason of clause (ii) or
(iii) of section 1212(a)(3)(A) shall be treated as so arising for purposes of
determining earnings and profits.</text>
</clause></subparagraph><subparagraph id="HE77F18BFBDF54C25AB1B18B77D8F0A3C"><enum>(B)</enum><header>Other
nondeductible items</header>
<clause id="H1FF7E3FCD0494CABBEE68C0F4244DBAE"><enum>(i)</enum><header>In
general</header><text>The earnings and profits of a regulated investment
company for any taxable year (but not its accumulated earnings and profits)
shall not be reduced by any amount which is not allowable as a deduction (other
than by reason of section 265 or 171(a)(2)) in computing its taxable income for
such taxable year.</text>
</clause><clause id="HA5FAC2DAA6634A2EAEEBA8CCCB167545"><enum>(ii)</enum><header>Coordination
with treatment of net capital losses</header><text>Clause (i) shall not apply
to a net capital loss to which subparagraph (A)
applies.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBFD6F001EDDC4F02A4522B09EFB9C76D"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="HD3B8A0C864BA43F09C6083DF90FDD0C6"><enum>(1)</enum><text display-inline="yes-display-inline">Subsection (c) of section 852 is amended by
adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H5460A08AC5FA4132B76F003A32804D8D" style="OLC">
<paragraph id="H216AE1655AB24AEBA9DB587B7D1EF6D6"><enum>(4)</enum><header>Regulated
investment company</header><text display-inline="yes-display-inline">For
purposes of this subsection, the term <quote>regulated investment
company</quote> includes a domestic corporation which is a regulated investment
company determined without regard to the requirements of subsection
(a).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF50F207599BB41D4B41CC5E0227FEB8E"><enum>(2)</enum><text>Paragraphs (1)(A)
and (2)(A) of section 871(k) are each amended by inserting <quote>which meets
the requirements of section 852(a) for the taxable year with respect to which
the dividend is paid</quote> before the period at the end.</text>
</paragraph></subsection><subsection id="HAF40B6B8F4F14749A27BAE7A5E3964A2"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section commented="no" id="HE6648013FC7C474EAAEF2B840F2F1069"><enum>303.</enum><header>Pass-thru of
exempt-interest dividends and foreign tax credits in fund of funds
structure</header>
<subsection commented="no" id="HF6F7FE41A0EC4F3B9E7CB448E8DA2B41"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 852 is
amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H5B604A97C7D44BD3A2F7EE9B534358FF" style="OLC">
<subsection commented="no" id="HF84B8C26712C4C0DB295D1CBB7DB9F30"><enum>(g)</enum><header>Special rules
for fund of funds</header>
<paragraph commented="no" id="HDDA5DE8619464AF1BF4A9D79ECA34697"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of a
qualified fund of funds—</text>
<subparagraph commented="no" id="H984E4DFCE5E44833B129F257C136045F"><enum>(A)</enum><text display-inline="yes-display-inline">such fund shall be qualified to pay
exempt-interest dividends to its shareholders without regard to whether such
fund satisfies the requirements of the first sentence of subsection (b)(5),
and</text>
</subparagraph><subparagraph commented="no" id="H546405B289564F219C402101949F7D12"><enum>(B)</enum><text>such fund may
elect the application of section 853 (relating to foreign tax credit allowed to
shareholders) without regard to the requirement of subsection (a)(1)
thereof.</text>
</subparagraph></paragraph><paragraph commented="no" id="H42E152063921461F986E1BB90EEA53D4"><enum>(2)</enum><header>Qualified fund
of funds</header><text>For purposes of this subsection, the term
<term>qualified fund of funds</term> means a regulated investment company if
(at the close of each quarter of the taxable year) at least 50 percent of the
value of its total assets is represented by interests in other regulated
investment
companies.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" id="HE4E733EBF384488B84C1158A26A96EFB"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="H064E5B95B094482F8A0A8174866A4DF6"><enum>304.</enum><header>Modification of
rules for spillover dividends of regulated investment companies</header>
<subsection id="H0D50AB22AE314DA38019A1218DCD9237"><enum>(a)</enum><header>Deadline for
declaration of dividend</header><text display-inline="yes-display-inline">Paragraph (1) of section 855(a) is amended
to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H2FC3A4D178424E2D836EC2167900F816" style="OLC">
<paragraph id="HB876D70A32044E9D81BA576B354A9E30"><enum>(1)</enum><text display-inline="yes-display-inline">declares a dividend before the later
of—</text>
<subparagraph id="HC8FC1467643847D2B14B6C8BC93B1A72"><enum>(A)</enum><text>the 15th day of
the 9th month following the close of the taxable year, or</text>
</subparagraph><subparagraph id="H7449CBE53C224F74BA860BFB69FAF9BF"><enum>(B)</enum><text>in the case of an
extension of time for filing the company’s return for the taxable year, the due
date for filing such return taking into account such extension,
and</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD9A3242F6B9D4F7F86A3324DD4858569"><enum>(b)</enum><header>Deadline for
distribution of dividend</header><text display-inline="yes-display-inline">Paragraph (2) of section 855(a) is amended
by striking <quote>the first regular dividend payment</quote> and inserting
<quote>the first dividend payment of the same type of dividend</quote>.</text>
</subsection><subsection id="H3F50838C6A8C4A2C94EC72898653D094"><enum>(c)</enum><header>Short-Term
capital gain</header><text>Subsection (a) of section 855 is amended by adding
at the end the following: <quote>For purposes of paragraph (2), a dividend
attributable to any short-term capital gain with respect to which a notice is
required under the Investment Company Act of 1940 shall be treated as the same
type of dividend as a capital gain dividend.</quote>.</text>
</subsection><subsection id="H7AEEB1F869CD4C858A6B8EE0D513E5D2"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
distributions in taxable years beginning after the date of the enactment of
this Act.</text>
</subsection></section><section commented="no" id="H579A3EB5CF3C4757986534400244562A"><enum>305.</enum><header>Return of
capital distributions of regulated investment companies</header>
<subsection id="H23829088E79141DBB5856BAC2F8A3D69"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (b) of
section 316 is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H2FBF0D6C790E470880A615A63DF9428B" style="OLC">
<paragraph id="H2413BD40D7F94C8198A056BF460C03E8"><enum>(4)</enum><header>Certain
distributions by regulated investment companies in excess of earnings and
profits</header><text display-inline="yes-display-inline">In the case of a
regulated investment company that has a taxable year other than a calendar
year, if the distributions by the company with respect to any class of stock of
such company for the taxable year exceed the company’s current and accumulated
earnings and profits which may be used for the payment of dividends on such
class of stock, the company’s current earnings and profits shall, for purposes
of subsection (a), be allocated first to distributions with respect to such
class of stock made during the portion of the taxable year which precedes
January
1.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H39A793865A1343649D6F3066FB0017E4"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
distributions made in taxable years beginning after the date of the enactment
of this Act.</text>
</subsection></section><section commented="no" id="H1A553496A8BE41859A122CA649C0D708"><enum>306.</enum><header>Distributions
in redemption of stock of a regulated investment company</header>
<subsection id="H64B19BB756144F51A247F706787A5200"><enum>(a)</enum><header>Redemptions
treated as exchanges</header>
<paragraph id="H34A26C041C04414D8CCF35372C7F6101"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 302 is amended by redesignating
paragraph (5) as paragraph (6) and by inserting after paragraph (4) the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H119A890AB14740F8B602E8A7173897A1" style="OLC">
<paragraph commented="no" id="H20D1EE779A1C4560BC10EA8109EF8650"><enum>(5)</enum><header>Redemptions by
certain regulated investment companies</header><text display-inline="yes-display-inline">Except to the extent provided in
regulations prescribed by the Secretary, subsection (a) shall apply to any
distribution in redemption of stock of a publicly offered regulated investment
company (within the meaning of section 67(c)(2)(B)) if—</text>
<subparagraph commented="no" id="HED471B0715ED4861BA1A2C24598BC46D"><enum>(A)</enum><text>such redemption is
upon the demand of the stockholder, and</text>
</subparagraph><subparagraph commented="no" id="H0BAA62597C5F42BAA1ADD8D1937DEE45"><enum>(B)</enum><text>such company
issues only stock which is redeemable upon the demand of the
stockholder.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H70FC911D6AF642BEAC1A047DE6F94F38"><enum>(2)</enum><header>Conforming
amendment</header><text>Subsection (a) of section 302 is amended by striking
<quote>or (4)</quote> and inserting <quote>(4), or (5)</quote>.</text>
</paragraph></subsection><subsection id="HD71202F608A3484CB5BC34C99D7CA9EB"><enum>(b)</enum><header>Losses on
redemptions not disallowed for fund-of-Funds regulated investment
companies</header><text>Paragraph (3) of section 267(f) is amended by adding at
the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H587A1964531845D6804659AB48358FC9" style="OLC">
<subparagraph id="H9D51169A670E4E59A3FE72717A177893"><enum>(D)</enum><header>Redemptions by
fund-of-funds regulated investment companies</header><text display-inline="yes-display-inline">Except to the extent provided in
regulations prescribed by the Secretary, subsection (a)(1) shall not apply to
any distribution in redemption of stock of a regulated investment company
if—</text>
<clause id="H166C009BD00845B68A0D186148153CBA"><enum>(i)</enum><text>such company
issues only stock which is redeemable upon the demand of the stockholder,
and</text>
</clause><clause id="HBCED93AC117F4A9F89EFBD95519A6CA1"><enum>(ii)</enum><text>such redemption
is upon the demand of another regulated investment
company.</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H2775FF3AEC5E48DBAC409A5BC668B140"><enum>(c)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to distributions after the date of the enactment of
this Act.</text>
</subsection></section><section id="H317F80D6B6CC49CE8849AE81AC56430E"><enum>307.</enum><header>Repeal of
preferential dividend rule for publicly offered regulated investment
companies</header>
<subsection id="H0BD74A5ABA474302A934715483BEE38A"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (c) of
section 562 is amended by striking <quote>The amount</quote> and inserting
<quote>Except in the case of a publicly offered regulated investment company
(as defined in section 67(c)(2)(B)), the amount</quote>.</text>
</subsection><subsection id="HC8C018854771410CAFB1850FBAF753F7"><enum>(b)</enum><header>Conforming
amendment</header><text display-inline="yes-display-inline">Section 562(c) is
amended by inserting <quote>(other than a publicly offered regulated investment
company (as so defined))</quote> after <quote>regulated investment
company</quote> in the second sentence thereof.</text>
</subsection><subsection id="H3B3918061DE54BBD8D5F0A14CA0C3D11"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
distributions in taxable years beginning after the date of the enactment of
this Act.</text>
</subsection></section><section id="H9A263DAE4C6B41E4888DD8FDCF48C7E4" section-type="subsequent-section"><enum>308.</enum><header>Elective deferral of
certain late-year losses of regulated investment companies</header>
<subsection id="H78FFEDEFFEAD4EFAA27A6C553C11E121"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Paragraph (8) of
section 852(b) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HD5B4E47710F04ED8B768BEA3D3ADA30B" style="OLC">
<paragraph id="HF8ABB5207A5644519AEF7745789D263C"><enum>(8)</enum><header>Elective
deferral of certain late-year losses</header>
<subparagraph id="H53B4B209B15E420CAF54FB0009EF3833"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as otherwise
provided by the Secretary, a regulated investment company may elect for any
taxable year to treat any portion of any qualified late-year loss for such
taxable year as arising on the first day of the following taxable year for
purposes of this title.</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="HA09AC9D7C0434F13B35CCDBD9A705E30"><enum>(B)</enum><header>Qualified
late-year loss</header><text display-inline="yes-display-inline">For purposes
of this paragraph, the term <term>qualified late-year loss</term> means—</text>
<clause id="HC7E55AD4892D443D99160DB08A6A4A7A"><enum>(i)</enum><text>any post-October
capital loss, and</text>
</clause><clause id="HA47CDAF21ECE44EF8299141D692D2AF1"><enum>(ii)</enum><text>any late-year
ordinary loss.</text>
</clause></subparagraph><subparagraph id="H82FC63A6D29148F087B9151725DF2A10"><enum>(C)</enum><header>Post-October
capital loss</header><text display-inline="yes-display-inline">For purposes of
this paragraph, the term <term>post-October capital loss</term> means the
greatest of—</text>
<clause id="HBCDEDD1903694E4481EC46170ECCBE62"><enum>(i)</enum><text display-inline="yes-display-inline">the net capital loss attributable to the
portion of the taxable year after October 31,</text>
</clause><clause id="HE97958957F2D4BADB0D17A566E915F90"><enum>(ii)</enum><text>the net long-term
capital loss attributable to such portion of the taxable year, or</text>
</clause><clause id="HECF7356FE2B64A7180B26457A909181D"><enum>(iii)</enum><text>the net
short-term capital loss attributable to such portion of the taxable
year.</text>
</clause></subparagraph><subparagraph id="H238DCCAA8AB0433696611BF83D93BC17"><enum>(D)</enum><header>Late-year
ordinary loss</header><text>For purposes of this paragraph, the term
<term>late-year ordinary loss</term> means the excess (if any) of—</text>
<clause id="H35AC9AA164D74B9EB6B47A150F2D1CE1"><enum>(i)</enum><text display-inline="yes-display-inline">the sum of—</text>
<subclause id="H45D7EC969C324DF19C565A4A35FBA9BC"><enum>(I)</enum><text>the specified
losses (as defined in section 4982(e)(5)(B)(ii)) attributable to the portion of
the taxable year after October 31, plus</text>
</subclause><subclause id="H85277CC9A2FA4238A696D417DF8F6F2F"><enum>(II)</enum><text>the ordinary
losses not described in subclause (I) attributable to the portion of the
taxable year after December 31, over</text>
</subclause></clause><clause id="HDF3D5A51265D4FB495C25D439FF9DA20"><enum>(ii)</enum><text>the sum
of—</text>
<subclause id="HB3C57DC64E6C42319477E41E0F00A1EB"><enum>(I)</enum><text display-inline="yes-display-inline">the specified gains (as defined in section
4982(e)(5)(B)(i)) attributable to the portion of the taxable year after October
31, plus</text>
</subclause><subclause id="H2A6F0108D0AD44BE99E6052D610470FC"><enum>(II)</enum><text>the ordinary
income not described in subclause (I) attributable to the portion of the
taxable year after December 31.</text>
</subclause></clause></subparagraph><subparagraph id="H79648F5EFCB1497FAE3579CACAE291F7"><enum>(E)</enum><header>Special rule for
companies determining required capital gain distributions on taxable year
basis</header><text>In the case of a company to which an election under section
4982(e)(4) applies—</text>
<clause id="H8661B28ECCF44E43BCF669C9C1A72C0D"><enum>(i)</enum><text>if
such company’s taxable year ends with the month of November, the amount of
qualified late-year losses (if any) shall be computed without regard to any
income, gain, or loss described in subparagraphs (C), (D)(i)(I), and
(D)(ii)(I), and</text>
</clause><clause id="H34503A5EF7E548E68C6AD2571C02DC5D"><enum>(ii)</enum><text>if such company’s
taxable year ends with the month of December, subparagraph (A) shall not
apply.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF2153D87F4A74C9E9B94AF7D0BB1EED8"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="HBFE713CFEB42410B8AAB850EE108A83B"><enum>(1)</enum><text>Subsection (b) of
section 852 is amended by striking paragraph (10).</text>
</paragraph><paragraph id="H8A71E074B8EB478182B86891BF54D4DA"><enum>(2)</enum><text>Paragraph (2) of
section 852(c) is amended by striking the first sentence and inserting the
following: <quote>For purposes of applying this chapter to distributions made
by a regulated investment company with respect to any calendar year, the
earnings and profits of such company shall be determined without regard to any
net capital loss attributable to the portion of the taxable year after October
31 and without regard to any late-year ordinary loss (as defined in subsection
(b)(8)(D)).</quote></text>
</paragraph><paragraph id="H6C47DDA9ECE84EFDAD1F789B63E79F1F"><enum>(3)</enum><text>Subparagraph (D)
of section 871(k)(2) is amended by striking the last two sentences and
inserting the following: <quote>For purposes of this subparagraph, the net
short-term capital gain of the regulated investment company shall be computed
by treating any short-term capital gain dividend includible in gross income
with respect to stock of another regulated investment company as a short-term
capital gain.</quote>.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H8E81C838C56A4CABBC7753CF4F780D78"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="HF451A7E19A7444008FEF118C5F36EA81"><enum>309.</enum><header>Exception to
holding period requirement for certain regularly declared exempt-interest
dividends</header>
<subsection id="H7B3BBFA66499473AAB41A937FCF91075"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraph (E) of
section 852(b)(4) is amended by striking all that precedes <quote>In the case
of a regulated investment company</quote> and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="HD568FB065F4748E8858F3D96FEB03057" style="OLC">
<subparagraph id="H12507F2BBD294BC49255968BE003B4F6"><enum>(E)</enum><header>Exception to
holding period requirement for certain regularly declared exempt-interest
dividends</header>
<clause id="HD79AF5E70DB142D38C2C39AD3F2C0EE7"><enum>(i)</enum><header>Daily dividend
companies</header><text display-inline="yes-display-inline">Except as otherwise
provided by regulations, subparagraph (B) shall not apply with respect to a
regular dividend paid by a regulated investment company which declares
exempt-interest dividends on a daily basis in an amount equal to at least 90
percent of its net tax-exempt interest and distributes such dividends on a
monthly or more frequent basis.</text>
</clause><clause id="H7EA08A74DBEA41CAA8A411E759B6388C"><enum>(ii)</enum><header>Authority to
shorten required holding period with respect to other
companies</header>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC9F5EA477B2C4237B994E8902DE6F340"><enum>(b)</enum><header>Conforming
amendment</header><text>Clause (ii) of section 852(b)(4)(E), as amended by
subsection (a), is amended by inserting <quote>(other than a company described
in clause (i))</quote> after <quote>regulated investment
company</quote>.</text>
</subsection><subsection id="HD0330C7B42E846E3B656943EC77A50FE"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to losses
incurred on shares of stock for which the taxpayer’s holding period begins
after the date of the enactment of this Act.</text>
</subsection></section><enum>IV</enum><header>Modifications
related to excise tax applicable to regulated investment companies</header>
<section id="H03F48805BCEE4D9AA5779C66AD4AE282"><enum>401.</enum><header>Excise tax
exemption for certain regulated investment companies owned by tax exempt
entities</header>
<subsection commented="no" id="H24A8BB804F5A45B3B18266760E45DB1A"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (f) of
section 4982 is amended—</text>
<paragraph commented="no" id="H5D224BA754824A3489D9157CA3038ACC"><enum>(1)</enum><text>by striking
<quote>either</quote> in the matter preceding paragraph (1),</text>
</paragraph><paragraph commented="no" id="HC77F8809A52C45E48C52870C0F0B4B09"><enum>(2)</enum><text>by striking
<quote>or</quote> at the end of paragraph (1),</text>
</paragraph><paragraph commented="no" id="HD316A3C9014E4EDEAF507286D14D162D"><enum>(3)</enum><text>by striking the
period at the end of paragraph (2), and</text>
</paragraph><paragraph commented="no" id="HBBF9DED6DF4241FE8FFBD16C2913A3B0"><enum>(4)</enum><text>by inserting after
paragraph (2) the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="H821CB32D60FF48FA879AABC08613F5EF" style="OLC">
<paragraph commented="no" id="H7BE7B7BDB1C848F1BB410E4688DC92A3"><enum>(3)</enum><text>any other
tax-exempt entity whose ownership of beneficial interests in the company would
not preclude the application of section 817(h)(4), or</text>
</paragraph><paragraph id="H2236121600DE4F1DB4304BA079DB87D8"><enum>(4)</enum><text>another regulated
investment company described in this
subsection.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H2EC57E2DCDA14158938B0BA503986D69"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to calendar
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="HDD0F0F9B93D34E3CA9C436DEEB53A745"><enum>402.</enum><header>Deferral of
certain gains and losses of regulated investment companies for excise tax
purposes</header>
<subsection id="H0CB8682D67DD41CBB6536B75BB8EF7F1"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subsection (e) of
section 4982 is amended by striking paragraphs (5) and (6) and inserting the
following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="H4B6940AB68694AF49AB0C46662D67708" style="OLC">
<paragraph display-inline="no-display-inline" id="H2D700718928145C595BC69ACE3E907AE"><enum>(5)</enum><header>Treatment of
specified gains and losses after October 31 of calendar year</header>
<subparagraph commented="no" id="H66C7BC2A1D4E460A820BBAC73FFD0372"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Any specified gain or
specified loss which (but for this paragraph) would be properly taken into
account for the portion of the calendar year after October 31 shall be treated
as arising on January 1 of the following calendar year.</text>
</subparagraph><subparagraph id="H46407D80423F47E0AB24FED69A550B54"><enum>(B)</enum><header>Specified gains
and losses</header><text>For purposes of this paragraph—</text>
<clause id="H606C01CA2CE04556923810C5BF6A1970"><enum>(i)</enum><header>Specified
gain</header><text>The term <term>specified gain</term> means ordinary gain
from the sale, exchange, or other disposition of property (including the
termination of a position with respect to such property). Such term shall
include any foreign currency gain attributable to a section 988 transaction
(within the meaning of section 988) and any amount includible in gross income
under section 1296(a)(1).</text>
</clause><clause id="H1D60F09560274CD8A9E13391EEFF91CD"><enum>(ii)</enum><header>Specified
loss</header><text display-inline="yes-display-inline">The term <term>specified
loss</term> means ordinary loss from the sale, exchange, or other disposition
of property (including the termination of a position with respect to such
property). Such term shall include any foreign currency loss attributable to a
section 988 transaction (within the meaning of section 988) and any amount
allowable as a deduction under section 1296(a)(2).</text>
</clause></subparagraph><subparagraph id="H966EEAFB23DE4E068F24D3E157B943CD"><enum>(C)</enum><header>Special rule for
companies electing to use the taxable year</header><text>In the case of any
company making an election under paragraph (4), subparagraph (A) shall be
applied by substituting the last day of the company’s taxable year for October
31.</text>
</subparagraph></paragraph><paragraph commented="no" id="H2571EE7F17FE441F8420923CBA026280"><enum>(6)</enum><header>Treatment of
mark to market gain</header>
<subparagraph commented="no" id="HB2BCB7B48101469189C2B70347116C2C"><enum>(A)</enum><header>In
general</header><text>For purposes of determining a regulated investment
company’s ordinary income, notwithstanding paragraph (1)(C), each specified
mark to market provision shall be applied as if such company’s taxable year
ended on October 31. In the case of a company making an election under
paragraph (4), the preceding sentence shall be applied by substituting the last
day of the company’s taxable year for October 31.</text>
</subparagraph><subparagraph commented="no" id="H2F642A63080240698EADDF6ED225D311"><enum>(B)</enum><header>Specified mark
to market provision</header><text>For purposes of this paragraph, the term
<term>specified mark to market provision</term> means sections 1256 and 1296
and any other provision of this title (or regulations thereunder) which treats
property as disposed of on the last day of the taxable year.</text>
</subparagraph></paragraph><paragraph id="H2D7F463D45FD441EB9D256127629F5DE"><enum>(7)</enum><header>Elective
deferral of certain ordinary losses</header><text display-inline="yes-display-inline">Except as provided in regulations
prescribed by the Secretary, in the case of a regulated investment company
which has a taxable year other than the calendar year—</text>
<subparagraph id="H2300C90967724479B9BECA84383A5E5A"><enum>(A)</enum><text>such company may
elect to determine its ordinary income for the calendar year without regard to
any net ordinary loss (determined without regard to specified gains and losses
taken into account under paragraph (5)) which is attributable to the portion of
such calendar year which is after the beginning of the taxable year which
begins in such calendar year, and</text>
</subparagraph><subparagraph id="H6382C138FA76407CB88343EBEE33C389"><enum>(B)</enum><text>any amount of net
ordinary loss not taken into account for a calendar year by reason of
subparagraph (A) shall be treated as arising on the 1st day of the following
calendar
year.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HA395915C1E364EE1B91006283E0F40E0"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to calendar
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="HB302498BAB26456EBF0F2B13B3DDAE9F"><enum>403.</enum><header>Distributed
amount for excise tax purposes determined on basis of taxes paid by regulated
investment company</header>
<subsection commented="no" id="H0B56F57493F14D7C9E6135944B20AFE8"><enum>(a)</enum><header>In
general</header><text>Subsection (c) of section 4982 is amended by adding at
the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H5507A7B070134D13841E733F54AAD8E6" style="OLC">
<paragraph commented="no" id="H71D344A301A04A2EA8335BA20A624403"><enum>(4)</enum><header>Special rule for
estimated tax payments</header>
<subparagraph commented="no" id="H8B19ED9C125243CBB3D1DA5B51CED1BF"><enum>(A)</enum><header>In
general</header><text>In the case of a regulated investment company which
elects the application of this paragraph for any calendar year—</text>
<clause commented="no" id="H1A33A31697664859A4D07A27D7D92E72"><enum>(i)</enum><text>the distributed
amount with respect to such company for such calendar year shall be increased
by the amount on which qualified estimated tax payments are made by such
company during such calendar year, and</text>
</clause><clause commented="no" id="HA667CB8C10A540C8B4D99AAB5961FC9E"><enum>(ii)</enum><text>the distributed
amount with respect to such company for the following calendar year shall be
reduced by the amount of such increase.</text>
</clause></subparagraph><subparagraph commented="no" id="H96ECC08486924C38B346E6443D2D67A6"><enum>(B)</enum><header>Qualified
estimated tax payments</header><text>For purposes of this paragraph, the term
<term>qualified estimated tax payments</term> means, with respect to any
calendar year, payments of estimated tax of a tax described in paragraph (1)(B)
for any taxable year which begins (but does not end) in such calendar
year.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H073FA60525CD418B810899843766B44C"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to calendar
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="H0CF26E0C5C31445B8BF27C5D942DE533"><enum>404.</enum><header>Increase in
required distribution of capital gain net income</header>
<subsection id="H4AE8B91F6D1B489D8E35396B62CA964A"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraph (B) of
section 4982(b)(1) is amended by striking <quote>98 percent</quote> and
inserting <quote>98.2 percent</quote>.</text>
</subsection><subsection id="HCED14D5B47F1447983F26432C7AA7ED9"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to calendar
years beginning after the date of the enactment of this Act.</text>
</subsection></section><enum>V</enum><header>Other
provisions</header>
<section id="H7C7AF92D1F5A45B4BDE1A629873F2ECF"><enum>501.</enum><header>Repeal of
assessable penalty with respect to liability for tax of regulated investment
companies</header>
<subsection id="H109461F325CF4A9C912C56D0054FA61B"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Part I of subchapter
B of chapter 68 is amended by striking section 6697 (and by striking the item
relating to such section in the table of sections of such part).</text>
</subsection><subsection id="H0BDFBC63C8594BDF8FE88106E4D40F76"><enum>(b)</enum><header>Conforming
amendment</header><text>Section 860 is amended by striking subsection
(j).</text>
</subsection><subsection id="HEAC033DF5C684FBB83AF58E409302D0A"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="HD1B18DC45F7B4D05A01CF4C48F8087B3"><enum>502.</enum><header>Modification of
sales load basis deferral rule for regulated investment companies</header>
<subsection id="H278E974F93084B6A8AAA871B8551A11D"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraph (C) of
section 852(f)(1) is amended by striking <quote>subsequently acquires</quote>
and inserting <quote>acquires, during the period beginning on the date of the
disposition referred to in subparagraph (B) and ending on January 31 of the
calendar year following the calendar year that includes the date of such
disposition,</quote>.</text>
</subsection><subsection id="H755477D4E81741C8B41471D574C0643D"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to charges
incurred in taxable years beginning after the date of the enactment of this
Act.</text>
</subsection></section>