[Congressional Record (Bound Edition), Volume 156 (2010), Part 12]
[House]
[Pages 16822-16828]
[From the U.S. Government Publishing Office, www.gpo.gov]




         REGULATED INVESTMENT COMPANY MODERNIZATION ACT OF 2010

  Mr. NEAL. Madam Speaker, I move to suspend the rules and pass the 
bill (H.R. 4337) to amend the Internal Revenue Code of 1986 to modify 
certain rules applicable to regulated investment companies, and for 
other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 4337

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Regulated 
     Investment Company Modernization Act of 2010''.
       (b) Reference.--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) Table of Contents.--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.

[[Page 16823]]

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.

                       TITLE VI--PAYGO COMPLIANCE

Sec. 601. Paygo compliance.

   TITLE I--CAPITAL LOSS CARRYOVERS OF REGULATED INVESTMENT COMPANIES

     SEC. 101. CAPITAL LOSS CARRYOVERS OF REGULATED INVESTMENT 
                   COMPANIES.

       (a) In General.--Subsection (a) of section 1212 is amended 
     by redesignating paragraph (3) as paragraph (4) and by 
     inserting after paragraph (2) the following new paragraph:
       ``(3) Regulated investment companies.--
       ``(A) In general.--If a regulated investment company has a 
     net capital loss for any taxable year--
       ``(i) paragraph (1) shall not apply to such loss,
       ``(ii) 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
       ``(iii) 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.
       ``(B) Coordination with general rule.--If a net capital 
     loss to which paragraph (1) applies is carried over to a 
     taxable year of a regulated investment company--
       ``(i) Losses to which this paragraph applies.--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).
       ``(ii) Losses to which general rule applies.--Paragraph (1) 
     shall be applied by substituting `net capital loss for the 
     loss year or any taxable year thereafter (other than a net 
     capital loss to which paragraph (3)(A) applies)' for `net 
     capital loss for the loss year or any taxable year 
     thereafter'.''.
       (b) Conforming Amendments.--
       (1) Subparagraph (C) of section 1212(a)(1) is amended to 
     read as follows:
       ``(C) 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,''.
       (2) Paragraph (10) of section 1222 is amended by striking 
     ``section 1212'' and inserting ``section 1212(a)(1)''.
       (c) Effective Date.--
       (1) In general.--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.
       (2) Coordination rules.--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.

  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.

       (a) Gross Income Test.--Subparagraph (A) of section 
     851(b)(2) is amended--
       (1) by striking ``foreign currencies'' and inserting 
     ``commodities'', and
       (2) by striking ``or currencies'' and inserting ``or 
     commodities''.
       (b) Repeal of Regulatory Authority To Exclude Certain 
     Foreign Currency Gains From Qualifying Income.--Subsection 
     (b) of section 851 is amended by striking ``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).'' in the flush matter after 
     paragraph (3).
       (c) Conforming Amendments.--
       (1) Subsection (h) of section 851 is amended by inserting 
     ``(determined by substituting `foreign currencies' for 
     `commodities' therein)'' after ``subsection (b)(2)(A)''.
       (2) Paragraph (4) of section 7704(d) is amended by 
     inserting ``(determined by substituting `foreign currencies' 
     for `commodities' therein)'' after ``section 851(b)(2)(A)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 202. SAVINGS PROVISIONS FOR FAILURES OF REGULATED 
                   INVESTMENT COMPANIES TO SATISFY GROSS INCOME 
                   AND ASSET TESTS.

       (a) Asset Test.--Subsection (d) of section 851 is amended--
       (1) by striking ``A corporation which meets'' and inserting 
     the following:
       ``(1) In general.--A corporation which meets'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Special rules regarding failure to satisfy 
     requirements.--If paragraph (1) does not preserve a 
     corporation's status as a regulated investment company for 
     any particular quarter--
       ``(A) In general.--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--
       ``(i) 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,
       ``(ii) the failure to meet the requirements of such 
     subsection for such quarter is due to reasonable cause and 
     not due to willful neglect, and
       ``(iii)(I) 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
       ``(II) the requirements of such subsection are otherwise 
     met within the time period specified in subclause (I).
       ``(B) Rule for certain de minimis failures.--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--
       ``(i) such failure is due to the ownership of assets the 
     total value of which does not exceed the lesser of--

       ``(I) 1 percent of the total value of the corporation's 
     assets at the end of the quarter for which such measurement 
     is done, or
       ``(II) $10,000,000, and

       ``(ii)(I) 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
       ``(II) the requirements of such subsection are otherwise 
     met within the time period specified in subclause (I).
       ``(C) Tax.--
       ``(i) Tax imposed.--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--

       ``(I) $50,000, or
       ``(II) 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.

       ``(ii) Period.--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.
       ``(iii) Administrative provisions.--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.''.
       (b) Gross Income Test.--Section 851 is amended by adding at 
     the end the following new subsection:
       ``(i) Failure To Satisfy Gross Income Test.--
       ``(1) Disclosure requirement.--A corporation that fails to 
     meet the requirement of paragraph (2) of subsection (b) for 
     any taxable year shall nevertheless be considered to

[[Page 16824]]

     have satisfied the requirement of such paragraph for such 
     taxable year if--
       ``(A) 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
       ``(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 purposes 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 company 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 allocable to 
     such reported capital gain dividend amount.

       ``(iii) Allocation of excess reported amount.--

       ``(I) In general.--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.
       ``(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 taxable 
     year, subclause (I) shall be applied by substituting `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 subparagraph--

       ``(I) Reported capital gain dividend amount.--The term 
     `reported capital gain dividend amount' means the amount 
     reported to its shareholders 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 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).
       ``(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 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).
       ``(vi) Special rule for losses late in the calendar 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.
       ``(ii) Excess reported amounts.--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--

       ``(I) the reported exempt-interest dividend amount, over
       ``(II) the excess reported amount which is allocable to 
     such reported exempt-interest dividend amount.

       ``(iii) Allocation of excess reported amount.--

       ``(I) In general.--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.
       ``(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 taxable 
     year, subclause (I) shall be applied by substituting `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 subparagraph--

       ``(I) Reported exempt-interest dividend amount.--The term 
     `reported exempt-interest dividend 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 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).
       ``(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 
     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 furnished 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 investment 
     company in a written notice mailed to its shareholders not 
     later than 60 days after the close of its taxable year'' and 
     inserting ``so reported by the regulated investment 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 statements furnished 
     to its shareholders'',
       (B) by striking ``designated by the regulated investment 
     company'' in subparagraph

[[Page 16825]]

     (B)(i) and inserting ``reported by the regulated investment 
     company as qualified dividend income in written statements 
     furnished to its shareholders'',
       (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.--
       (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 following:
       ``(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 furnished 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 allocable to 
     such reported interest related dividend amount.

       ``(iii) Allocation of excess reported amount.--

       ``(I) In general.--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.
       ``(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 taxable 
     year, subclause (I) shall be applied by substituting `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 subparagraph--

       ``(I) Reported interest related dividend amount.--The term 
     `reported interest related dividend 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 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).
       ``(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) Termination.--The term `interest related dividend' 
     shall not include any dividend with respect to''.
       (2) Short-term capital gain dividends.--Subparagraph (C) of 
     section 871(k)(2) is amended by striking all that precedes 
     ``any taxable year of the company beginning'' and inserting 
     the following:
       ``(C) Short-term capital gain dividend.--For purposes of 
     this paragraph--
       ``(i) In general.--Except as provided in clause (ii), the 
     term `short-term capital gain dividend' 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.
       ``(ii) Excess reported amounts.--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 `short-term capital gain dividend' 
     means the excess of--

       ``(I) the reported short-term capital gain dividend amount, 
     over
       ``(II) the excess reported amount which is allocable to 
     such reported short-term capital gain dividend amount.

       ``(iii) Allocation of excess reported amount.--

       ``(I) In general.--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.
       ``(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 taxable 
     year, subclause (I) shall be applied by substituting `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 subparagraph--

       ``(I) Reported short-term capital gain dividend amount.--
     The term `reported short-term capital gain dividend amount' 
     means the amount reported to its shareholders under clause 
     (i) as a short-term capital gain dividend.
       ``(II) Excess reported amount.--The term `excess reported 
     amount' means the excess of the aggregate reported amount 
     over the qualified short-term gain of the company for the 
     taxable year.
       ``(III) Aggregate reported amount.--The term `aggregate 
     reported amount' 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).
       ``(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) Termination.--The term `short-term capital gain 
     dividend' shall not include any dividend with respect to''.
       (g) Conforming Amendments.--Section 855 is amended--
       (1) by striking subsection (c) and redesignating subsection 
     (d) as subsection (c), and
       (2) by striking ``, (c) and (d)'' in subsection (a) and 
     inserting ``and (c)''.
       (h) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.
       (i) Application of JGTRRA Sunset.--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.

     SEC. 302. EARNINGS AND PROFITS OF REGULATED INVESTMENT 
                   COMPANIES.

       (a) In General.--Paragraph (1) of section 852(c) is amended 
     to read as follows:
       ``(1) Treatment of nondeductible items.--
       ``(A) Net capital loss.--If a regulated investment company 
     has a net capital loss for any taxable year--
       ``(i) such net capital loss shall not be taken into account 
     for purposes of determining the company's earnings and 
     profits, and
       ``(ii) 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.
       ``(B) Other nondeductible items.--
       ``(i) In general.--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.
       ``(ii) Coordination with treatment of net capital losses.--
     Clause (i) shall not apply to a net capital loss to which 
     subparagraph (A) applies.''.
       (b) Conforming Amendments.--
       (1) Subsection (c) of section 852 is amended by adding at 
     the end the following new paragraph:
       ``(4) Regulated investment company.--For purposes of this 
     subsection, the term `regulated investment company' includes 
     a domestic corporation which is a regulated investment 
     company determined without regard to the requirements of 
     subsection (a).''.
       (2) Paragraphs (1)(A) and (2)(A) of section 871(k) are each 
     amended by inserting ``which meets the requirements of 
     section 852(a) for the taxable year with respect to which the 
     dividend is paid'' before the period at the end.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 303. PASS-THRU OF EXEMPT-INTEREST DIVIDENDS AND FOREIGN 
                   TAX CREDITS IN FUND OF FUNDS STRUCTURE.

       (a) In General.--Section 852 is amended by adding at the 
     end the following new subsection:
       ``(g) Special Rules for Fund of Funds.--
       ``(1) In general.--In the case of a qualified fund of 
     funds--
       ``(A) 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
       ``(B) 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.
       ``(2) Qualified fund of funds.--For purposes of this 
     subsection, the term `qualified fund of funds' means a 
     regulated investment

[[Page 16826]]

     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.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 304. MODIFICATION OF RULES FOR SPILLOVER DIVIDENDS OF 
                   REGULATED INVESTMENT COMPANIES.

       (a) Deadline for Declaration of Dividend.--Paragraph (1) of 
     section 855(a) is amended to read as follows:
       ``(1) declares a dividend before the later of--
       ``(A) the 15th day of the 9th month following the close of 
     the taxable year, or
       ``(B) 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''.
       (b) Deadline for Distribution of Dividend.--Paragraph (2) 
     of section 855(a) is amended by striking ``the first regular 
     dividend payment'' and inserting ``the first dividend payment 
     of the same type of dividend''.
       (c) Short-term Capital Gain.--Subsection (a) of section 855 
     is amended by adding at the end the following: ``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.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 305. RETURN OF CAPITAL DISTRIBUTIONS OF REGULATED 
                   INVESTMENT COMPANIES.

       (a) In General.--Subsection (b) of section 316 is amended 
     by adding at the end the following new paragraph:
       ``(4) Certain distributions by regulated investment 
     companies in excess of earnings and profits.--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.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made in taxable years beginning 
     after the date of the enactment of this Act.

     SEC. 306. DISTRIBUTIONS IN REDEMPTION OF STOCK OF A REGULATED 
                   INVESTMENT COMPANY.

       (a) Redemptions Treated as Exchanges.--
       (1) In general.--Subsection (b) of section 302 is amended 
     by redesignating paragraph (5) as paragraph (6) and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) Redemptions by certain regulated investment 
     companies.--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--
       ``(A) such redemption is upon the demand of the 
     stockholder, and
       ``(B) such company issues only stock which is redeemable 
     upon the demand of the stockholder.''.
       (2) Conforming amendment.--Subsection (a) of section 302 is 
     amended by striking ``or (4)'' and inserting ``(4), or (5)''.
       (b) Losses on Redemptions Not Disallowed for Fund-of-funds 
     Regulated Investment Companies.--Paragraph (3) of section 
     267(f) is amended by adding at the end the following new 
     subparagraph:
       ``(D) Redemptions by fund-of-funds regulated investment 
     companies.--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--
       ``(i) such company issues only stock which is redeemable 
     upon the demand of the stockholder, and
       ``(ii) such redemption is upon the demand of another 
     regulated investment company.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 307. REPEAL OF PREFERENTIAL DIVIDEND RULE FOR PUBLICLY 
                   OFFERED REGULATED INVESTMENT COMPANIES.

       (a) In General.--Subsection (c) of section 562 is amended 
     by striking ``The amount'' and inserting ``Except in the case 
     of a publicly offered regulated investment company (as 
     defined in section 67(c)(2)(B)), the amount''.
       (b) Conforming Amendment.--Section 562(c) is amended by 
     inserting ``(other than a publicly offered regulated 
     investment company (as so defined))'' after ``regulated 
     investment company'' in the second sentence thereof.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 308. ELECTIVE DEFERRAL OF CERTAIN LATE-YEAR LOSSES OF 
                   REGULATED INVESTMENT COMPANIES.

       (a) In General.--Paragraph (8) of section 852(b) is amended 
     to read as follows:
       ``(8) Elective deferral of certain late-year losses.--
       ``(A) In general.--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.
       ``(B) Qualified late-year loss.--For purposes of this 
     paragraph, the term `qualified late-year loss' means--
       ``(i) any post-October capital loss, and
       ``(ii) any late-year ordinary loss.
       ``(C) Post-october capital loss.--For purposes of this 
     paragraph, the term `post-October capital loss' means the 
     greatest of--
       ``(i) the net capital loss attributable to the portion of 
     the taxable year after October 31,
       ``(ii) the net long-term capital loss attributable to such 
     portion of the taxable year, or
       ``(iii) the net short-term capital loss attributable to 
     such portion of the taxable year.
       ``(D) Late-year ordinary loss.--For purposes of this 
     paragraph, the term `late-year ordinary loss' means the 
     excess (if any) of--
       ``(i) the sum of--

       ``(I) the specified losses (as defined in section 
     4982(e)(5)(B)(ii)) attributable to the portion of the taxable 
     year after October 31, plus
       ``(II) the ordinary losses not described in subclause (I) 
     attributable to the portion of the taxable year after 
     December 31, over

       ``(ii) the sum of--

       ``(I) the specified gains (as defined in section 
     4982(e)(5)(B)(i)) attributable to the portion of the taxable 
     year after October 31, plus
       ``(II) the ordinary income not described in subclause (I) 
     attributable to the portion of the taxable year after 
     December 31.

       ``(E) Special rule for companies determining required 
     capital gain distributions on taxable year basis.--In the 
     case of a company to which an election under section 
     4982(e)(4) applies--
       ``(i) 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
       ``(ii) if such company's taxable year ends with the month 
     of December, subparagraph (A) shall not apply.''.
       (b) Conforming Amendments.--
       (1) Subsection (b) of section 852 is amended by striking 
     paragraph (10).
       (2) Paragraph (2) of section 852(c) is amended by striking 
     the first sentence and inserting the following: ``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)).''
       (3) Subparagraph (D) of section 871(k)(2) is amended by 
     striking the last two sentences and inserting the following: 
     ``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.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 309. EXCEPTION TO HOLDING PERIOD REQUIREMENT FOR CERTAIN 
                   REGULARLY DECLARED EXEMPT-INTEREST DIVIDENDS.

       (a) In General.--Subparagraph (E) of section 852(b)(4) is 
     amended by striking all that precedes ``In the case of a 
     regulated investment company'' and inserting the following:
       ``(E) Exception to holding period requirement for certain 
     regularly declared exempt-interest dividends.--
       ``(i) Daily dividend companies.--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.
       ``(ii) Authority to shorten required holding period with 
     respect to other companies.--''.
       (b) Conforming Amendment.--Clause (ii) of section 
     852(b)(4)(E), as amended by subsection (a), is amended by 
     inserting ``(other than a company described in clause (i))'' 
     after ``regulated investment company''.
       (c) Effective Date.--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.

[[Page 16827]]



 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.

       (a) In General.--Subsection (f) of section 4982 is 
     amended--
       (1) by striking ``either'' in the matter preceding 
     paragraph (1),
       (2) by striking ``or'' at the end of paragraph (1),
       (3) by striking the period at the end of paragraph (2), and
       (4) by inserting after paragraph (2) the following new 
     paragraphs:
       ``(3) any other tax-exempt entity whose ownership of 
     beneficial interests in the company would not preclude the 
     application of section 817(h)(4), or
       ``(4) another regulated investment company described in 
     this subsection.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to calendar years beginning after the date of the 
     enactment of this Act.

     SEC. 402. DEFERRAL OF CERTAIN GAINS AND LOSSES OF REGULATED 
                   INVESTMENT COMPANIES FOR EXCISE TAX PURPOSES.

       (a) In General.--Subsection (e) of section 4982 is amended 
     by striking paragraphs (5) and (6) and inserting the 
     following new paragraphs:
       ``(5) Treatment of specified gains and losses after october 
     31 of calendar year.--
       ``(A) In general.--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.
       ``(B) Specified gains and losses.--For purposes of this 
     paragraph--
       ``(i) Specified gain.--The term `specified gain' 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).
       ``(ii) Specified loss.--The term `specified loss' 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).
       ``(C) Special rule for companies electing to use the 
     taxable year.--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.
       ``(6) Treatment of mark to market gain.--
       ``(A) In general.--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.
       ``(B) Specified mark to market provision.--For purposes of 
     this paragraph, the term `specified mark to market provision' 
     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.
       ``(7) Elective deferral of certain ordinary losses.--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--
       ``(A) 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
       ``(B) 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.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to calendar years beginning after the date of the 
     enactment of this Act.

     SEC. 403. DISTRIBUTED AMOUNT FOR EXCISE TAX PURPOSES 
                   DETERMINED ON BASIS OF TAXES PAID BY REGULATED 
                   INVESTMENT COMPANY.

       (a) In General.--Subsection (c) of section 4982 is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rule for estimated tax payments.--
       ``(A) In general.--In the case of a regulated investment 
     company which elects the application of this paragraph for 
     any calendar year--
       ``(i) 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
       ``(ii) the distributed amount with respect to such company 
     for the following calendar year shall be reduced by the 
     amount of such increase.
       ``(B) Qualified estimated tax payments.--For purposes of 
     this paragraph, the term `qualified estimated tax payments' 
     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.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to calendar years beginning after the date of the 
     enactment of this Act.

     SEC. 404. INCREASE IN REQUIRED DISTRIBUTION OF CAPITAL GAIN 
                   NET INCOME.

       (a) In General.--Subparagraph (B) of section 4982(b)(1) is 
     amended by striking ``98 percent'' and inserting ``98.2 
     percent''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to calendar years beginning after the date of the 
     enactment of this Act.

                       TITLE V--OTHER PROVISIONS

     SEC. 501. REPEAL OF ASSESSABLE PENALTY WITH RESPECT TO 
                   LIABILITY FOR TAX OF REGULATED INVESTMENT 
                   COMPANIES.

       (a) In General.--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).
       (b) Conforming Amendment.--Section 860 is amended by 
     striking subsection (j).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 502. MODIFICATION OF SALES LOAD BASIS DEFERRAL RULE FOR 
                   REGULATED INVESTMENT COMPANIES.

       (a) In General.--Subparagraph (C) of section 852(f)(1) is 
     amended by striking ``subsequently acquires'' and inserting 
     ``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,''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to charges incurred in taxable years beginning 
     after the date of the enactment of this Act.

                       TITLE VI--PAYGO COMPLIANCE

     SEC. 601. PAYGO COMPLIANCE.

       The budgetary effects of this Act, for the purpose of 
     complying with the Statutory Pay-As-You-Go-Act of 2010, shall 
     be determined by reference to the latest statement titled 
     ``Budgetary Effects of PAYGO Legislation'' for this Act, 
     submitted for printing in the Congressional Record by the 
     Chairman of the House Budget Committee, provided that such 
     statement has been submitted prior to the vote on passage.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Massachusetts (Mr. Neal) and the gentleman from Michigan (Mr. Camp) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Massachusetts.


                             General Leave

  Mr. NEAL. Madam Speaker, I ask unanimous consent that all Members may 
have 5 legislative days in which to revise and extend their remarks and 
to include extraneous material on the bill under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Massachusetts?
  There was no objection.
  Mr. NEAL. Madam Speaker, I yield myself such time as I might consume.
  Madam Speaker, more than 100 years ago, the first U.S. mutual fund 
was started in Boston. Mutual funds have been a way of life for 
``everyman'' to invest in the market, with the benefits of pooling and 
diversification. Indeed, it invites the term ``mutualization.'' Today, 
more than 50 million households invest through mutual funds with a 
median household income of $80,000. More than 50 percent of 401(k) plan 
assets were invested in mutual funds at the end of 2009.
  H.R. 4337 was introduced last year by Mr. Rangel and me to modernize 
the tax laws regarding regulated investment companies, better known as 
mutual funds. A technical explanation and revenue table for this bill 
may be found on the Joint Tax Web site, www.jct.gov.
  The tax rules that relate to mutual funds date back more than a half 
century. Although these rules have been updated from time to time, it 
has been

[[Page 16828]]

over 20 years since they were last revisited. The bill before us today 
would make several changes to the Tax Code to address outdated 
provisions, such as rules that relate to preferential dividends and 
rules that require mutual funds to send separate annual dividend 
designation notices to shareholders and rules that prevent mutual funds 
from earning income from commodities.
  In June, my subcommittee, the Select Revenue Measures Subcommittee, 
reviewed this legislation with a panel of experts who expressed support 
for these changes.
  Today, I am pleased to be joined by my friend, the gentleman from 
Michigan (Mr. Camp), in bringing this bill to the floor with a few 
technical changes and revenue offsets from within the industry. The 
Ways and Means Committee has the responsibility to review our tax rules 
from time to time, remove the dead wood, and update where necessary. 
This bill accomplishes that to the benefit of investors, taxpayers, and 
mutual fund companies. I urge its adoption.
  I reserve the balance of my time.
  Mr. CAMP. Madam Speaker, I yield myself such time as I may consume.
  Madam Speaker, regulated investment companies, better known in their 
most prevalent form as mutual funds, are intended to provide individual 
investors the ability to invest easily and with low costs in a 
diversified pool of professionally managed investments. According to 
the Investment Company Institute, ICI, the main trade association for 
mutual funds, more than 50 million American families currently invest 
in mutual funds.
  Most of the current law mutual fund rules were last collectively 
updated more than two decades ago. H.R. 4337 would modify and update 
certain technical tax rules pertaining to mutual funds in order to make 
them better conform to, and interact with, other aspects of the Tax 
Code and applicable securities laws.
  On June 15, 2010, the Ways and Means Subcommittee on Select Revenue 
Measures held a hearing on H.R. 4337. Invited witnesses, including a 
representative of ICI, were supportive of the bill, and we are not 
aware of any controversy or opposition to the legislation.
  Let me close by making a broader point. It certainly is appropriate 
for Ways and Means to periodically review the tax law to ensure that 
targeted provisions of importance to particular segments of the 
economy, including the mutual fund industry and their investors, are 
kept up to date; and I certainly appreciate the majority's decision to 
hold a hearing on this bill before bringing it to the floor, because 
our committee works best when it works under regular order.
  Having said that, I must say that I am deeply disappointed that our 
committee seems to have lost sight of its responsibility to address the 
single most significant tax issue facing Americans right now--
preventing a massive $3.8 trillion tax increase at the end of this 
year. These looming tax hikes on families, seniors, investors, and 
small businesses not only threaten every American taxpayer with higher 
taxes, but they're also contributing significantly to the uncertainty 
we see in the economy as a whole. So while we should continue to work 
together to modernize the tax rules governing mutual funds, we also 
should be working together to prevent harmful tax increases, such as 
the tax hikes on capital gains and dividends that will dramatically 
affect the very same mutual fund investors we're focusing on here 
today.
  With that, Madam Speaker, I urge support for the bill before us.

                                 Investment Company Institute,

                               Washington, DC, September 28, 2010.
     Re: ICI Strongly Supports Mutual Fund Modernization 
         Legislation.

     Hon. Nancy Pelosi,
     Speaker, House of Representatives,
     U.S. Capitol, Washington, DC.
     Hon. John Boehner,
     Republican Leader, House of Representatives,
     U.S. Capitol, Washington, DC.
       Dear Speaker Pelosi and Republican Leader Boehner: The 
     Investment Company Institute strongly supports the bipartisan 
     Regulated Investment Company (``RIC'') Modernization Act 
     (H.R. 4337). On behalf of the millions of mutual fund 
     shareholders who would benefit from this bill, we urge all 
     House members to vote favorably on this bill when it is 
     considered on the Suspension Calendar.
       This bill would modernize the tax laws that govern mutual 
     funds. These laws have not been updated in any meaningful or 
     comprehensive way since 1986, almost a quarter century ago; 
     some of the provisions in current law date back more than 60 
     years. Numerous developments during the past 20-plus years--
     including the development of new fund structures and 
     distribution channels--have placed considerable stress on the 
     currently applicable tax rules.
       The legislation's many benefits were discussed in detail 
     during the bill's June 2010 hearing before the Committee on 
     Ways and Means Select Revenue Measures Subcommittee. The 
     three key areas in which the bill would benefit funds and 
     their shareholders involve:
       improving the efficiency of mutual fund investment 
     structures,
       reducing disproportionate tax consequences for inadvertent 
     errors, and
       minimizing the need for amended tax statements and amended 
     tax returns.
       As discussed in detail in our testimony before the 
     Subcommittee, the bill would reduce the burden arising from 
     amended year-end tax information statements, improve a fund's 
     ability to meet its distribution requirements, create 
     remedies for inadvertent mutual find qualification failures, 
     improve the tax treatment of investing in a ``fund-of-funds'' 
     structure, and update the tax treatment of fund capital 
     losses.
       This bill reflects the sponsors' conclusion, with which we 
     strongly agree, that it is important to update, clarify, and 
     streamline the mutual fund tax rules. By eliminating 
     uncertainties and allowing appropriate innovations, funds 
     will become more efficient. The ICI supports the pay-fors 
     included in H.R. 4337, which apply to regulated investment 
     companies and fully offset the modest revenue costs of the 
     legislation.
       Enacting this legislation will allow our members to focus 
     on what they do best--serving their shareholders.
       We urge your support.
           Sincerely,
                                              Paul Schott Stevens,
                            President and Chief Executive Officer.

  I reserve the balance of my time.
  Mr. NEAL. Madam Speaker, I yield myself such time as I might consume.
  Madam Speaker, we held a hearing on this bill. It is well received by 
the investors; it is well received by the mutual fund companies, and it 
certainly received no negative commentary in the House. Why cannot we 
just come to this floor and speak to the issue at hand?
  I worked hard on this piece of legislation with Mr. Tiberi for a long 
period of time. This is the legislation that's in front of this 
Congress at this particular time. It was well met because it was fully 
vetted in the committee with sufficient opportunity for any- and 
everyone to comment on it.
  This is a product that we should be proud of. For the first time in 
two decades, we are modernizing issues that relate to the industry that 
many, if not millions, of Americans come to depend upon for retirement. 
I don't understand why there would be any additional argument made on 
any other piece of legislation that was being considered when, in fact, 
this is the matter that's before us at this particular time.
  I reserve the balance of my time.

                              {time}  1710

  Mr. CAMP. I have no further requests for time, and I yield back the 
balance of my time.
  Mr. NEAL. Madam Speaker, I have no further requests for time, I urge 
adoption of the bill, and I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Massachusetts (Mr. Neal) that the House suspend the 
rules and pass the bill, H.R. 4337, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

                          ____________________