-CITE-
26 USC Subchapter M - Regulated Investment Companies and
Real Estate Investment Trusts 01/19/04
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TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter M - Regulated Investment Companies and Real Estate
Investment Trusts
-HEAD-
SUBCHAPTER M - REGULATED INVESTMENT COMPANIES AND REAL ESTATE
INVESTMENT TRUSTS
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Part
I. Regulated investment companies.
II. Real estate investment trusts.
III. Provisions which apply to both regulated investment
companies and real estate investment trusts.
IV. Real estate mortgage investment conduits.
V. Financial asset securitization investment trusts.
AMENDMENTS
1996 - Pub. L. 104-188, title I, Sec. 1621(c), Aug. 20, 1996, 110
Stat. 1867, added item for part V.
1988 - Pub. L. 100-647, title I, Sec. 1018(u)(30), Nov. 10, 1988,
102 Stat. 3591, added item for part IV.
1978 - Pub. L. 95-600, title III, Sec. 362(d)(8), Nov. 6, 1978,
92 Stat. 2852, added item for part III.
-SECREF-
SUBCHAPTER REFERRED TO IN OTHER SECTIONS
This subchapter is referred to in sections 11, 52, 269B, 1504 of
this title.
-End-
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26 USC PART I - REGULATED INVESTMENT COMPANIES 01/19/04
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TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter M - Regulated Investment Companies and Real Estate
Investment Trusts
PART I - REGULATED INVESTMENT COMPANIES
-HEAD-
PART I - REGULATED INVESTMENT COMPANIES
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Sec.
851. Definition of regulated investment company.
852. Taxation of regulated investment companies and their
shareholders.
853. Foreign tax credit allowed to shareholders.
854. Limitations applicable to dividends received from
regulated investment company.
855. Dividends paid by regulated investment company after
close of taxable year.
AMENDMENTS
1980 - Pub. L. 96-223, title IV, Sec. 404(b)(7), Apr. 2, 1980, 94
Stat. 307, inserted "and taxable interest" after "dividends" in
item 854 for taxable years after Dec. 31, 1980, and before Jan. 1,
1982.
1960 - Pub. L. 86-779, Sec. 10(b)(1), Sept. 14, 1960, 74 Stat.
1008, inserted "and Real Estate Investment Trusts" in subchapter M
heading, part I and part II designations thereunder and part I
designation preceding table of sections numbered 851 to 855.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in sections 59, 59A, 382 of this title.
-End-
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26 USC Sec. 851 01/19/04
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TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter M - Regulated Investment Companies and Real Estate
Investment Trusts
PART I - REGULATED INVESTMENT COMPANIES
-HEAD-
Sec. 851. Definition of regulated investment company
-STATUTE-
(a) General rule
For purposes of this subtitle, the term "regulated investment
company" means any domestic corporation -
(1) which, at all times during the taxable year -
(A) is registered under the Investment Company Act of 1940,
as amended (15 U.S.C. 80a-1 to 80b-2) as a management company
or unit investment trust, or
(B) has in effect an election under such Act to be treated as
a business development company, or
(2) which is a common trust fund or similar fund excluded by
section 3(c)(3) of such Act (15 U.S.C. 80a-3(c)) from the
definition of "investment company" and is not included in the
definition of "common trust fund" by section 584(a).
(b) Limitations
A corporation shall not be considered a regulated investment
company for any taxable year unless -
(1) it files with its return for the taxable year an election
to be a regulated investment company or has made such election
for a previous taxable year;
(2) at least 90 percent of its gross income is derived from
dividends, interest, payments with respect to securities loans
(as defined in section 512(a)(5)), and gains from the sale or
other disposition of stock or securities (as defined in section
2(a)(36) of the Investment Company Act of 1940, as amended) or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities,
or currencies; and
(3) at the close of each quarter of the taxable year -
(A) at least 50 percent of the value of its total assets is
represented by -
(i) cash and cash items (including receivables), Government
securities and securities of other regulated investment
companies, and
(ii) other securities for purposes of this calculation
limited, except and to the extent provided in subsection (e),
in respect of any one issuer to an amount not greater in
value than 5 percent of the value of the total assets of the
taxpayer and to not more than 10 percent of the outstanding
voting securities of such issuer, and
(B) not more than 25 percent of the value of its total assets
is invested in the securities (other than Government securities
or the securities of other regulated investment companies) of
any one issuer, or of two or more issuers which the taxpayer
controls and which are determined, under regulations prescribed
by the Secretary, to be engaged in the same or similar trades
or businesses or related trades or businesses.
For purposes of paragraph (2), there shall be treated as dividends
amounts included in gross income under section 951(a)(1)(A)(i) or
1293(a) for the taxable year to the extent that, under section
959(a)(1) or 1293(c) (as the case may be), there is a distribution
out of the earnings and profits of the taxable year which are
attributable to the amounts so included. 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). For
purposes of paragraph (2), amounts excludable from gross income
under section 103(a) shall be treated as included in gross income.
Income derived from a partnership or trust shall be treated as
described in paragraph (2) only to the extent such income is
attributable to items of income of the partnership or trust (as the
case may be) which would be described in paragraph (2) if realized
by the regulated investment company in the same manner as realized
by the partnership or trust.
(c) Rules applicable to subsection (b)(3)
For purposes of subsection (b)(3) and this subsection -
(1) In ascertaining the value of the taxpayer's investment in
the securities of an issuer, for the purposes of subparagraph
(B), there shall be included its proper proportion of the
investment of any other corporation, a member of a controlled
group, in the securities of such issuer, as determined under
regulations prescribed by the Secretary.
(2) The term "controls" means the ownership in a corporation of
20 percent or more of the total combined voting power of all
classes of stock entitled to vote.
(3) The term "controlled group" means one or more chains of
corporations connected through stock ownership with the taxpayer
if -
(A) 20 percent or more of the total combined voting power of
all classes of stock entitled to vote of each of the
corporations (except the taxpayer) is owned directly by one or
more of the other corporations, and
(B) the taxpayer owns directly 20 percent or more of the
total combined voting power of all classes of stock entitled to
vote, of at least one of the other corporations.
(4) The term "value" means, with respect to securities (other
than those of majority-owned subsidiaries) for which market
quotations are readily available, the market value of such
securities; and with respect to other securities and assets, fair
value as determined in good faith by the board of directors,
except that in the case of securities of majority-owned
subsidiaries which are investment companies such fair value shall
not exceed market value or asset value, whichever is higher.
(5) All other terms shall have the same meaning as when used in
the Investment Company Act of 1940, as amended.
(d) Determination of status
A corporation which meets the requirements of subsections (b)(3)
and (c) at the close of any quarter shall not lose its status as a
regulated investment company because of a discrepancy during a
subsequent quarter between the value of its various investments and
such requirements unless such discrepancy exists immediately after
the acquisition of any security or other property and is wholly or
partly the result of such acquisition. A corporation which does not
meet such requirements at the close of any quarter by reason of a
discrepancy existing immediately after the acquisition of any
security or other property which is wholly or partly the result of
such acquisition during such quarter shall not lose its status for
such quarter as a regulated investment company if such discrepancy
is eliminated within 30 days after the close of such quarter and in
such cases it shall be considered to have met such requirements at
the close of such quarter for purposes of applying the preceding
sentence.
(e) Investment companies furnishing capital to development
corporations
(1) General rule
If the Securities and Exchange Commission determines, in
accordance with regulations issued by it, and certifies to the
Secretary not earlier than 60 days prior to the close of the
taxable year of a management company or a business development
company described in subsection (a)(1), that such investment
company is principally engaged in the furnishing of capital to
other corporations which are principally engaged in the
development or exploitation of inventions, technological
improvements, new processes, or products not previously generally
available, such investment company may, in the computation of 50
percent of the value of its assets under subparagraph (A) of
subsection (b)(3) for any quarter of such taxable year, include
the value of any securities of an issuer, whether or not the
investment company owns more than 10 percent of the outstanding
voting securities of such issuer, the basis of which, when added
to the basis of the investment company for securities of such
issuer previously acquired, did not exceed 5 percent of the value
of the total assets of the investment company at the time of the
subsequent acquisition of securities. The preceding sentence
shall not apply to the securities of an issuer if the investment
company has continuously held any security of such issuer (or of
any predecessor company of such issuer as determined under
regulations prescribed by the Secretary) for 10 or more years
preceding such quarter of such taxable year.
(2) Limitation
The provisions of this subsection shall not apply at the close
of any quarter of a taxable year to an investment company if at
the close of such quarter more than 25 percent of the value of
its total assets is represented by securities of issuers with
respect to each of which the investment company holds more than
10 percent of the outstanding voting securities of such issuer
and in respect of each of which or any predecessor thereof the
investment company has continuously held any security for 10 or
more years preceding such quarter unless the value of its total
assets so represented is reduced to 25 percent or less within 30
days after the close of such quarter.
(3) Determination of status
For purposes of this subsection, unless the Securities and
Exchange Commission determines otherwise, a corporation shall be
considered to be principally engaged in the development or
exploitation of inventions, technological improvements, new
processes, or products not previously generally available, for at
least 10 years after the date of the first acquisition of any
security in such corporation or any predecessor thereof by such
investment company if at the date of such acquisition the
corporation or its predecessor was principally so engaged, and an
investment company shall be considered at any date to be
furnishing capital to any company whose securities it holds if
within 10 years prior to such date it has acquired any of such
securities, or any securities surrendered in exchange therefor,
from such other company or predecessor thereof. For purposes of
the certification under this subsection, the Securities and
Exchange Commission shall have authority to issue such rules,
regulations and orders, and to conduct such investigations and
hearings, either public or private, as it may deem appropriate.
(4) Definitions
The terms used in this subsection shall have the same meaning
as in subsections (b)(3) and (c) of this section.
(f) Certain unit investment trusts
For purposes of this title -
(1) A unit investment trust (as defined in the Investment
Company Act of 1940) -
(A) which is registered under such Act and issues periodic
payment plan certificates (as defined in such Act) in one or
more series,
(B) substantially all of the assets of which, as to all such
series, consist of (i) securities issued by a single management
company (as defined in such Act) and securities acquired
pursuant to subparagraph (C), or (ii) securities issued by a
single other corporation, and
(C) which has no power to invest in any other securities
except securities issued by a single other management company,
when permitted by such Act or the rules and regulations of the
Securities and Exchange Commission,
shall not be treated as a person.
(2) In the case of a unit investment trust described in
paragraph (1) -
(A) each holder of an interest in such trust shall, to the
extent of such interest, be treated as owning a proportionate
share of the assets of such trust;
(B) the basis of the assets of such trust which are treated
under subparagraph (A) as being owned by a holder of an
interest in such trust shall be the same as the basis of his
interest in such trust; and
(C) in determining the period for which the holder of an
interest in such trust has held the assets of the trust which
are treated under subparagraph (A) as being owned by him, there
shall be included the period for which such holder has held his
interest in such trust.
This subsection shall not apply in the case of a unit investment
trust which is a segregated asset account under the insurance laws
or regulations of a State.
(g) Special rule for series funds
(1) In general
In the case of a regulated investment company (within the
meaning of subsection (a)) having more than one fund, each fund
of such regulated investment company shall be treated as a
separate corporation for purposes of this title (except with
respect to the definitional requirement of subsection (a)).
(2) Fund defined
For purposes of paragraph (1) the term "fund" means a
segregated portfolio of assets, the beneficial interests in which
are owned by the holders of a class or series of stock of the
regulated investment company that is preferred over all other
classes or series in respect of such portfolio of assets.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 268; Pub. L. 85-866, title I,
Sec. 38, Sept. 2, 1958, 72 Stat. 1638; Pub. L. 91-172, title IX,
Sec. 908(a), Dec. 30, 1969, 83 Stat. 717; Pub. L. 94-12, title VI,
Sec. 602(a)(2), Mar. 29, 1975, 89 Stat. 58; Pub. L. 94-455, title
XIX, Secs. 1901(a)(109), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1783, 1834; Pub. L. 95-345, Sec. 2(a)(3), Aug. 15, 1978, 92 Stat.
481; Pub. L. 95-600, title VII, Sec. 701(s)(1), Nov. 6, 1978, 92
Stat. 2911; Pub. L. 97-424, title V, Sec. 547(b)(1), Jan. 6, 1983,
96 Stat. 2199; Pub. L. 98-369, div. A, title X, Sec. 1071(a)(1),
July 18, 1984, 98 Stat. 1049; Pub. L. 99-514, title VI, Secs.
652(a), (b), 653(a)-(c), 654(a), title XII, Sec. 1235(f)(3), Oct.
22, 1986, 100 Stat. 2297, 2298, 2575; Pub. L. 100-647, title I,
Sec. 1006(m), (n)(1), (2)(A), (B), (4), (5), (o), Nov. 10, 1988,
102 Stat. 3415, 3416; Pub. L. 105-34, title XII, Sec.
1271(a)-(b)(7), Aug. 5, 1997, 111 Stat. 1036, 1037.)
-REFTEXT-
REFERENCES IN TEXT
The Investment Company Act of 1940, as amended, referred to in
subsecs. (a)(1), (b)(2), (c)(5), and (f)(1), is title I of act Aug.
22, 1940, ch. 686, 54 Stat. 789, as amended, which is classified
generally to subchapter I (Sec. 80a-1 et seq.) of chapter 2D of
Title 15, Commerce and Trade. Section 2(a)(36) of the Act is
classified to section 80a-2(a)(36) of Title 15. For complete
classification of this Act to the Code, see section 80a-51 of Title
15 and Tables.
-MISC1-
AMENDMENTS
1997 - Subsec. (b). Pub. L. 105-34, Sec. 1271(b)(1), in
concluding provisions, substituted "paragraph (2), amounts
excludable" for "paragraphs (2) and (3), amounts excludable" and
struck out "In the case of the taxable year in which a regulated
investment company is completely liquidated, there shall not be
taken into account under paragraph (3) any gain from the sale,
exchange, or distribution of any property after the adoption of the
plan of complete liquidation." at end.
Subsec. (b)(2). Pub. L. 105-34, Sec. 1271(a), inserted "and" at
end.
Subsec. (b)(3), (4). Pub. L. 105-34, Sec. 1271(a), redesignated
par. (4) as (3) and struck out former par. (3) which read as
follows: "less than 30 percent of its gross income is derived from
the sale or disposition of any of the following which was held for
less than 3 months:
"(A) stock or securities (as defined in section 2(a)(36) of the
Investment Company Act of 1940, as amended),
"(B) options, futures, or forward contracts (other than
options, futures, or forward contracts on foreign currencies), or
"(C) foreign currencies (or options, futures, or forward
contracts on foreign currencies) but only if such currencies (or
options, futures, or forward contracts) are not directly related
to the company's principal business of investing in stock or
securities (or options and futures with respect to stocks or
securities), and".
Subsec. (c). Pub. L. 105-34, Sec. 1271(b)(2), substituted
"subsection (b)(3)" for "subsection (b)(4)" in heading and
introductory provisions.
Subsec. (d). Pub. L. 105-34, Sec. 1271(b)(3), substituted
"subsections (b)(3)" for "subsections (b)(4)".
Subsec. (e)(1). Pub. L. 105-34, Sec. 1271(b)(4), substituted
"subsection (b)(3)" for "subsection (b)(4)".
Subsec. (e)(4). Pub. L. 105-34, Sec. 1271(b)(5), substituted
"subsections (b)(3)" for "subsections (b)(4)".
Subsec. (g). Pub. L. 105-34, Sec. 1271(b)(6), redesignated
subsec. (h) as (g) and struck out former subsec. (g) which provided
for treatment of certain hedging transactions.
Subsec. (g)(3). Pub. L. 105-34, Sec. 1271(b)(7), struck out par.
(3) which provided special rule for abnormal redemptions.
Subsec. (h). Pub. L. 105-34, Sec. 1271(b)(6), redesignated
subsec. (h) as (g).
1988 - Subsec. (a)(1). Pub. L. 100-647, Sec. 1006(m)(1), amended
par. (1) generally. Prior to amendment, par. (1) read as follows:
"which, at all times during the taxable year, is registered under
the Investment Company Act of 1940, as amended (15 U.S.C. 80a-1 to
80b-2), as a management company, business development company, or
unit investment trust, or".
Subsec. (b). Pub. L. 100-647, Sec. 1006(n)(1), (5), inserted at
end "Income derived from a partnership or trust shall be treated as
described in paragraph (2) only to the extent such income is
attributable to items of income of the partnership or trust (as the
case may be) which would be described in paragraph (2) if realized
by the regulated investment company in the same manner as realized
by the partnership or trust. In the case of the taxable year in
which a regulated investment company is completely liquidated,
there shall not be taken into account under paragraph (3) any gain
from the sale, exchange, or distribution of any property after the
adoption of the plan of complete liquidation."
Pub. L. 100-647, Sec. 1006(n)(2)(B), substituted "which are not
directly related" for "which are not ancillary" in last sentence.
Subsec. (b)(3). Pub. L. 100-647, Sec. 1006(n)(2)(A), amended par.
(3) generally. Prior to amendment, par. (3) read as follows: "less
than 30 percent of its gross income is derived from the sale or
other disposition of stock or securities held for less than 3
months; and".
Subsec. (e)(1). Pub. L. 100-647, Sec. 1006(m)(2), substituted "a
management company or a business development company described in
subsection (a)(1)" for "a registered management company or
registered business development company".
Subsec. (g)(2)(A)(i). Pub. L. 100-647, Sec. 1006(n)(4),
substituted "contractual obligation" for "contractual option".
Subsec. (h). Pub. L. 100-647, Sec. 1006(o)(1), redesignated
subsec. (q) as (h).
Subsec. (h)(3). Pub. L. 100-647, Sec. 1006(o)(2), added par. (3).
Subsec. (q). Pub. L. 100-647, Sec. 1006(o)(1), redesignated
subsec. (q) as (h).
1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 652(a), substituted
"as a management company, business development company, or unit
investment trust" for "either as a management company or as a unit
investment trust".
Subsec. (b). Pub. L. 99-514, Sec. 1235(f)(3), inserted "or
1293(a)" and "or 1293(c) (as the case may be)", in concluding
provision.
Pub. L. 99-514, Sec. 653(c), inserted before last sentence "For
purposes of paragraph (2), the Secretary may by regulation exclude
from qualifying income foreign currency gains which are not
ancillary to the company's principal business of investing in stock
or securities (or options and futures with respect to stock or
securities)."
Subsec. (b)(2). Pub. L. 99-514, Sec. 653(b), inserted "(as
defined in section 2(a)(36) of the Investment Company Act of 1940,
as amended) or foreign currencies, or other income (including but
not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock,
securities, or currencies".
Subsec. (e)(1). Pub. L. 99-514, Sec. 652(b), substituted
"registered management company or registered business development
company" for "registered management company".
Subsec. (g). Pub. L. 99-514, Sec. 653(a), added subsec. (g).
Subsec. (q). Pub. L. 99-514, Sec. 654(a), added subsec. (q).
1984 - Subsec. (a). Pub. L. 98-369 struck out "(other than a
personal holding company as defined in section 542)" after "any
domestic corporation" in introductory provisions.
1983 - Subsec. (b). Pub. L. 97-424 substituted "section 103(a)"
for "section 103(a)(1)" after "gross income under".
1978 - Subsec. (b). Pub. L. 95-600 required that for purposes of
pars. (2) and (3), amounts excludable from gross income under
section 103(a)(1) shall be treated as included in gross income.
Subsec. (b)(2). Pub. L. 95-345 inserted provision relating to
payments with respect to securities loans.
1976 - Subsec. (a)(1). Pub. L. 94-455, Sec. 1901(a)(109)(A),
struck out "54 Stat. 789;" before "15 U.S.C. 80a-1 to 80b-2)".
Subsec. (b)(1), (4)(B). Pub. L. 94-455, Sec. 1901(a)(109)(B),
struck out "which began after December 31, 1941" after "previous
taxable year" in par. (1), and "or his delegate" after "Secretary"
in par. (4)(B).
Subsecs. (c), (d). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary" wherever appearing.
1975 - Subsec. (b). Pub. L. 94-12 inserted provisions directing
that, for purposes of par. (2), there shall be treated as dividends
amounts included in gross income under section 951(a)(1)(A)(i) for
the taxable year to the extent that, under section 959(a)(1), there
is a distribution out of earnings and profits of the taxable year
which are attributable to the amounts so included.
1969 - Subsec. (f). Pub. L. 91-172 added subsec. (f).
1958 - Subsec. (e)(1). Pub. L. 85-866, Sec. 38(a), substituted
"not earlier than 60 days" for "not less than 60 days" in first
sentence.
Subsec. (e)(2). Pub. L. 85-866, Sec. 38(b), substituted "issuer"
for "issues".
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to taxable years beginning
after Aug. 5, 1997, see section 1271(c) of Pub. L. 105-34, set out
as a note under section 817 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1006(n)(2)(C) of Pub. L. 100-647 provided that:
"Subparagraph (C) of section 851(b)(3) of the 1986 Code (as amended
by subparagraph (A)), and the amendment made by subparagraph (B)
[amending this section], shall apply to taxable years beginning
after the date of the enactment of this Act [Nov. 10, 1988]."
Amendment by section 1006(m), (n)(1), (2)(A), (4), (5), (o) of
Pub. L. 100-647 effective, except as otherwise provided, as if
included in the provision of the Tax Reform Act of 1986, Pub. L.
99-514, to which such amendment relates, see section 1019(a) of
Pub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 652(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1986."
Section 653(d) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after the date of the enactment of this Act [Oct.
22, 1986]."
Section 654(b) of Pub. L. 99-514 provided that:
"(1) In general. - The amendment made by subsection (a) [amending
this section] shall apply to taxable years beginning after the date
of the enactment of this Act [Oct. 22, 1986].
"(2) Treatment of certain existing series funds. - In the case of
a regulated investment company which has more than one fund on the
date of the enactment of this act, and has before such date been
treated for Federal income tax purposes as a single corporation -
"(A) the amendment made by subsection (a), and the resulting
treatment of each fund as a separate corporation, shall not give
rise to the realization or recognition of income or loss by such
regulated investment company, its funds, or its shareholders, and
"(B) the tax attributes of such regulated investment company
shall be appropriately allocated among its funds."
Amendment by section 1235(f)(3) of Pub. L. 99-514 applicable to
taxable years of foreign corporations beginning after Dec. 31,
1986, see section 1235(h) of Pub. L. 99-514, set out as an
Effective Date note under section 1291 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1982, with certain exceptions, see section
1071(a)(5) of Pub. L. 98-369, set out as a note under section 852
of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Section 701(s)(3) of Pub. L. 95-600 provided that: "The
amendments made by this section [amending this section and section
852 of this title] shall apply to taxable years beginning after
December 31, 1975."
Amendment by Pub. L. 95-345 applicable with respect to amounts
received after Dec. 31, 1976, as payments with respect to
securities loans (as defined in section 512(a)(5) of this title),
and transfers of securities, under agreements described in section
1058 of this title, occurring after such date, see section 2(e) of
Pub. L. 95-345, set out as a note under section 509 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(109) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1975 AMENDMENT
Amendment by Pub. L. 94-12 applicable to taxable years of foreign
corporations beginning after Dec. 31, 1975, and to taxable years of
United States shareholders (within the meaning of section 951(b) of
this title) within which or with which such taxable years of such
foreign corporations end, see section 602(f) of Pub. L. 94-12, set
out as an Effective Date note under section 955 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Section 908(b) of Pub. L. 91-172 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years of unit investment trusts ending after December 31,
1968, and to taxable years of holders of interests in such trusts
ending with or within such taxable years of such trusts. The
enactment of this section shall not be construed to result in the
realization of gain or loss by any unit investment trust or by any
holder of an interest in a unit investment trust."
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 11, 50B, 403, 817, 852,
853, 860L, 992, 1212, 1247, 1296, 7603, 7704 of this title; title
42 section 1395nn.
-End-
-CITE-
26 USC Sec. 852 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter M - Regulated Investment Companies and Real Estate
Investment Trusts
PART I - REGULATED INVESTMENT COMPANIES
-HEAD-
Sec. 852. Taxation of regulated investment companies and their
shareholders
-STATUTE-
(a) Requirements applicable to regulated investment companies
The provisions of this part (other than subsection (c) of this
section) shall not be applicable to a regulated investment company
for a taxable year unless -
(1) the deduction for dividends paid during the taxable year
(as defined in section 561, but without regard to capital gain
dividends) equals or exceeds the sum of -
(A) 90 percent of its investment company taxable income for
the taxable year determined without regard to subsection
(b)(2)(D); and
(B) 90 percent of the excess of (i) its interest income
excludable from gross income under section 103(a) over (ii) its
deductions disallowed under sections 265, 171(a)(2), and
(2) either -
(A) the provisions of this part applied to the investment
company for all taxable years ending on or after November 8,
1983, or
(B) as of the close of the taxable year, the investment
company has no earnings and profits accumulated in any taxable
year to which the provisions of this part (or the corresponding
provisions of prior law) did not apply to it.
The Secretary may waive the requirements of paragraph (1) for any
taxable year if the regulated investment company establishes to the
satisfaction of the Secretary that it was unable to meet such
requirements by reason of distributions previously made to meet the
requirements of section 4982.
(b) Method of taxation of companies and shareholders
(1) Imposition of tax on regulated investment companies
There is hereby imposed for each taxable year upon the
investment company taxable income of every regulated investment
company a tax computed as provided in section 11, as though the
investment company taxable income were the taxable income
referred to in section 11. In the case of a regulated investment
company which is a personal holding company (as defined in
section 542) or which fails to comply for the taxable year with
regulations prescribed by the Secretary for the purpose of
ascertaining the actual ownership of its stock, such tax shall be
computed at the highest rate of tax specified in section 11(b).
(2) Investment company taxable income
The investment company taxable income shall be the taxable
income of the regulated investment company adjusted as follows:
(A) There shall be excluded the amount of the net capital
gain, if any.
(B) The net operating loss deduction provided in section 172
shall not be allowed.
(C) The deductions for corporations provided in part VIII
(except section 248) in subchapter B (section 241 and
following, relating to the deduction for dividends received,
etc.) shall not be allowed.
(D) the (!1) deduction for dividends paid (as defined in
section 561) shall be allowed, but shall be computed without
regard to capital gain dividends and exempt-interest dividends.
(E) The taxable income shall be computed without regard to
section 443(b) (relating to computation of tax on change of
annual accounting period).
(F) The taxable income shall be computed without regard to
section 454(b) (relating to short-term obligations issued on a
discount basis) if the company so elects in a manner prescribed
by the Secretary.
(3) Capital gains
(A) Imposition of tax
There is hereby imposed for each taxable year in the case of
every regulated investment company a tax, determined as
provided in section 1201(a), on the excess, if any, of the net
capital gain over the deduction for dividends paid (as defined
in section 561) determined with reference to capital gain
dividends only.
(B) Treatment of capital gain dividends by shareholders
A capital gain dividend shall be treated by the shareholders
as a gain from the sale or exchange of a capital asset held for
more than 1 year.
(C) Definition of capital gain dividend
For purposes of this part, a capital gain dividend is any
dividend, or part thereof, which is designated by the company
as a capital gain dividend in a written notice mailed to its
shareholders not later than 60 days after the close of its
taxable year; except that, if there is an increase in the
excess described in subparagraph (A) of this paragraph for such
year which results from a determination (as defined in section
860(e)), such designation may be made with respect to such
increase at any time before the expiration of 120 days after
the date of such determination. If the aggregate amount so
designated with respect to a taxable year of the company
(including capital gains dividends paid after the close of the
taxable year described in section 855) is greater than the net
capital gain of the taxable year, the portion of each
distribution which shall be a capital gain dividend shall be
only that proportion of the amount so designated which such net
capital gain bears to the aggregate amount so designated. For
purposes of this subparagraph, the amount of the net capital
gain for a taxable year (to which an election under section
4982(e)(4) does not apply) shall be determined without regard
to any net capital loss or net long-term capital loss
attributable to transactions after October 31 of such year, and
any such net capital loss or net long-term capital loss shall
be treated as arising on the 1st day of the next taxable year.
To the extent provided in regulations, the preceding sentence
shall apply also for purposes of computing the taxable income
of the regulated investment company.
(D) Treatment by shareholders of undistributed capital gains
(i) Every shareholder of a regulated investment company at
the close of the company's taxable year shall include, in
computing his long-term capital gains in his return for his
taxable year in which the last day of the company's taxable
year falls, such amount as the company shall designate in
respect of such shares in a written notice mailed to its
shareholders at any time prior to the expiration of 60 days
after close of its taxable year, but the amount so includible
by any shareholder shall not exceed that part of the amount
subjected to tax in subparagraph (A) which he would have
received if all of such amount had been distributed as capital
gain dividends by the company to the holders of such shares at
the close of its taxable year.
(ii) For purposes of this title, every such shareholder shall
be deemed to have paid, for his taxable year under clause (i),
the tax imposed by subparagraph (A) on the amounts required by
this subparagraph to be included in respect of such shares in
computing his long-term capital gains for that year; and such
shareholder shall be allowed credit or refund, as the case may
be, for the tax so deemed to have been paid by him.
(iii) The adjusted basis of such shares in the hands of the
shareholder shall be increased, with respect to the amounts
required by this subparagraph to be included in computing his
long-term capital gains, by the difference between the amount
of such includible gains and the tax deemed paid by such
shareholder in respect of such shares under clause (ii).
(iv) In the event of such designation the tax imposed by
subparagraph (A) shall be paid by the regulated investment
company within 30 days after close of its taxable year.
(v) The earnings and profits of such regulated investment
company, and the earnings and profits of any such shareholder
which is a corporation, shall be appropriately adjusted in
accordance with regulations prescribed by the Secretary.
(4) Loss on sale or exchange of stock held 6 months or less
(A) Loss attributable to capital gain dividend
If -
(i) subparagraph (B) or (D) of paragraph (3) provides that
any amount with respect to any share is to be treated as
long-term capital gain, and
(ii) such share is held by the taxpayer for 6 months or
less,
then any loss (to the extent not disallowed under subparagraph
(B)) on the sale or exchange of such share shall, to the extent
of the amount described in clause (i), be treated as a
long-term capital loss.
(B) Loss attributable to exempt-interest dividend
If -
(i) a shareholder of a regulated investment company
receives an exempt-interest dividend with respect to any
share, and
(ii) such share is held by the taxpayer for 6 months or
less,
then any loss on the sale or exchange of such share shall, to
the extent of the amount of such exempt-interest dividend, be
disallowed.
(C) Determination of holding periods
For purposes of this paragraph, the rules of paragraphs (3)
and (4) of section 246(c) shall apply in determining the period
for which the taxpayer has held any share of stock; except that
"6 months" shall be substituted for each number of days
specified in subparagraph (B) (!2) of section 246(c)(3).
(D) Losses incurred under a periodic liquidation plan
To the extent provided in regulations, subparagraphs (A) and
(B) shall not apply to losses incurred on the sale or exchange
of shares of stock in a regulated investment company pursuant
to a plan which provides for the periodic liquidation of such
shares.
(E) Authority to shorten required holding period
In the case of a regulated investment company which regularly
distributes at least 90 percent of its net tax-exempt interest,
the Secretary may by regulations prescribe that subparagraph
(B) (and subparagraph (C) to the extent it relates to
subparagraph (B)) shall be applied on the basis of a holding
period requirement shorter than 6 months; except that such
shorter holding period requirement shall not be shorter than
the greater of 31 days or the period between regular
distributions of exempt-interest dividends.
(5) Exempt-interest dividends
If, at the close of each quarter of its taxable year, at least
50 percent of the value (as defined in section 851(c)(4)) of the
total assets of the regulated investment company consists of
obligations described in section 103(a), such company shall be
qualified to pay exempt-interest dividends, as defined herein, to
its shareholders.
(A) Definition
An exempt-interest dividend means any dividend or part
thereof (other than a capital gain dividend) paid by a
regulated investment company and designated by it as an
exempt-interest dividend in a written notice mailed to its
shareholders not later than 60 days after the close of its
taxable year. If the aggregate amount so designated with
respect to a taxable year of the company (including
exempt-interest dividends paid after the close of the taxable
year as described in section 855) is greater than the excess of
-
(i) the amount of interest excludable from gross income
under section 103(a), over
(ii) the amounts disallowed as deductions under sections
265 and 171(a)(2),
the portion of such distribution which shall constitute an
exempt-interest dividend shall be only that proportion of the
amount so designated as the amount of such excess for such
taxable year bears to the amount so designated.
(B) Treatment of exempt-interest dividends by shareholders
An exempt-interest dividend shall be treated by the
shareholders for all purposes of this subtitle as an item of
interest excludable from gross income under section 103(a).
Such purposes include but are not limited to -
(i) the determination of gross income and taxable income,
(ii) the determination of distributable net income under
subchapter J,
(iii) the allowance of, or calculation of the amount of,
any credit or deduction, and
(iv) the determination of the basis in the hands of any
shareholder of any share of stock of the company.
(6) Section 311(b) not to apply to certain distributions
Section 311(b) shall not apply to any distribution by a
regulated investment company to which this part applies, if such
distribution is in redemption of its stock upon the demand of the
shareholder.
(7) Time certain dividends taken into account
For purposes of this title, any dividend declared by a
regulated investment company in October, November, or December of
any calendar year and payable to shareholders of record on a
specified date in such a month shall be deemed -
(A) to have been received by each shareholder on December 31
of such calendar year, and
(B) to have been paid by such company on December 31 of such
calendar year (or, if earlier, as provided in section 855).
The preceding sentence shall apply only if such dividend is
actually paid by the company during January of the following
calendar year.
(8) Special rule for treatment of certain foreign currency losses
To the extent provided in regulations, the taxable income of a
regulated investment company (other than a company to which an
election under section 4982(e)(4) applies) shall be computed
without regard to any net foreign currency loss attributable to
transactions after October 31 of such year, and any such net
foreign currency loss shall be treated as arising on the 1st day
of the following taxable year.
(9) Dividends treated as received by company on ex-dividend date
For purposes of this title, if a regulated investment company
is the holder of record of any share of stock on the record date
for any dividend payable with respect to such stock, such
dividend shall be included in gross income by such company as of
the later of -
(A) the date such share became ex-dividend with respect to
such dividend, or
(B) the date such company acquired such share.
(10) Special rule for certain losses on stock in passive foreign
investment company
To the extent provided in regulations, the taxable income of a
regulated investment company (other than a company to which an
election under section 4982(e)(4) applies) shall be computed
without regard to any net reduction in the value of any stock of
a passive foreign investment company with respect to which an
election under section 1296(k) is in effect occurring after
October 31 of the taxable year, and any such reduction shall be
treated as occurring on the first day of the following taxable
year.
(c) Earnings and profits
(1) 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 in computing its taxable income for such taxable year.
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) Coordination with tax on undistributed income
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 (or net foreign currency
loss) attributable to transactions after October 31 of such year,
without regard to any net reduction in the value of any stock of
a passive foreign investment company with respect to which an
election under section 1296(k) is in effect occurring after
October 31 of such year, and with such other adjustments as the
Secretary may by regulations prescribe. The preceding sentence
shall apply -
(A) only to the extent that the amount distributed by the
company with respect to the calendar year does not exceed the
required distribution for such calendar year (as determined
under section 4982 by substituting "100 percent" for each
percentage set forth in section 4982(b)(1)), and
(B) except as provided in regulations, only if an election
under section 4982(e)(4) is not in effect with respect to such
company.
(3) Distributions to meet requirements of subsection (a)(2)(B)
Any distribution which is made in order to comply with the
requirements of subsection (a)(2)(B) -
(A) shall be treated for purposes of this subsection and
subsection (a)(2)(B) as made from earnings and profits which,
but for the distribution, would result in a failure to meet
such requirements (and allocated to such earnings on a
first-in, first-out basis), and
(B) to the extent treated under subparagraph (A) as made from
accumulated earnings and profits, shall not be treated as a
distribution for purposes of subsection (b)(2)(D) and section
855.
(d) Distributions in redemption of interests in unit investment
trusts
In the case of a unit investment trust -
(1) which is registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1 and following) and issues periodic payment
plan certificates (as defined in such Act), and
(2) substantially all of the assets of which consist of
securities issued by a management company (as defined in such
Act),
section 562(c) (relating to preferential dividends) shall not apply
to a distribution by such trust to a holder of an interest in such
trust in redemption of part or all of such interest, with respect
to the capital gain net income of such trust attributable to such
redemption.
(e) Procedures similar to deficiency dividend procedures made
applicable
(1) In general
If -
(A) there is a determination that the provisions of this part
do not apply to an investment company for any taxable year
(hereinafter in this subsection referred to as the "non-RIC
year"), and
(B) such investment company meets the distribution
requirements of paragraph (2) with respect to the non-RIC year,
for purposes of applying subsection (a)(2) to subsequent taxable
years, the provisions of this part shall be treated as applying
to such investment company for the non-RIC year. If the
determination under subparagraph (A) is solely as a result of the
failure to meet the requirements of subsection (a)(2), the
preceding sentence shall also apply for purposes of applying
subsection (a)(2) to the non-RIC year and the amount referred to
in paragraph (2)(A)(i) shall be the portion of the accumulated
earnings and profits which resulted in such failure.
(2) Distribution requirements
(A) In general
The distribution requirements of this paragraph are met with
respect to any non-RIC year if, within the 90-day period
beginning on the date of the determination (or within such
longer period as the Secretary may permit), the investment
company makes 1 or more qualified designated distributions and
the amount of such distributions is not less than the excess of
-
(i) the portion of the accumulated earnings and profits of
the investment company (as of the date of the determination)
which are attributable to the non-RIC year, over
(ii) any interest payable under paragraph (3).
(B) Qualified designated distribution
For purposes of this paragraph, the term "qualified
designated distribution" means any distribution made by the
investment company if -
(i) section 301 applies to such distribution, and
(ii) such distribution is designated (at such time and in
such manner as the Secretary shall by regulations prescribe)
as being taken into account under this paragraph with respect
to the non-RIC year.
(C) Effect on dividends paid deduction
Any qualified designated distribution shall not be included
in the amount of dividends paid for purposes of computing the
dividends paid deduction for any taxable year.
(3) Interest charge
(A) In general
If paragraph (1) applies to any non-RIC year of an investment
company, such investment company shall pay interest at the
underpayment rate established under section 6621 -
(i) on an amount equal to 50 percent of the amount referred
to in paragraph (2)(A)(i),
(ii) for the period -
(I) which begins on the last day prescribed for payment
of the tax imposed for the non-RIC year (determined without
regard to extensions), and
(II) which ends on the date the determination is made.
(B) Coordination with subtitle F
Any interest payable under subparagraph (A) may be assessed
and collected at any time during the period during which any
tax imposed for the taxable year in which the determination is
made may be assessed and collected.
(4) Provision not to apply in the case of fraud
The provisions of this subsection shall not apply if the
determination contains a finding that the failure to meet any
requirement of this part was due to fraud with intent to evade
tax.
(5) Determination
For purposes of this subsection, the term "determination" has
the meaning given to such term by section 860(e). Such term also
includes a determination by the investment company filed with the
Secretary that the provisions of this part do not apply to the
investment company for a taxable year.
(f) Treatment of certain load charges
(1) In general
If -
(A) the taxpayer incurs a load charge in acquiring stock in a
regulated investment company and, by reason of incurring such
charge or making such acquisition, the taxpayer acquires a
reinvestment right,
(B) such stock is disposed of before the 91st day after the
date on which such stock was acquired, and
(C) the taxpayer subsequently acquires stock in such
regulated investment company or in another regulated investment
company and the otherwise applicable load charge is reduced by
reason of the reinvestment right,
the load charge referred to in subparagraph (A) (to the extent it
does not exceed the reduction referred to in subparagraph (C))
shall not be taken into account for purposes of determining the
amount of gain or loss on the disposition referred to in
subparagraph (B). To the extent such charge is not taken into
account in determining the amount of such gain or loss, such
charge shall be treated as incurred in connection with the
acquisition referred to in subparagraph (C) (including for
purposes of reapplying this paragraph).
(2) Definitions and special rules
For purposes of this subsection -
(A) Load charge
The term "load charge" means any sales or similar charge
incurred by a person in acquiring stock of a regulated
investment company. Such term does not include any charge
incurred by reason of the reinvestment of a dividend.
(B) Reinvestment right
The term "reinvestment right" means any right to acquire
stock of 1 or more regulated investment companies without the
payment of a load charge or with the payment of a reduced
charge.
(C) Nonrecognition transactions
If the taxpayer acquires stock in a regulated investment
company from another person in a transaction in which gain or
loss is not recognized, the taxpayer shall succeed to the
treatment of such other person under this subsection.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 271; July 11, 1956, ch. 573,
Sec. 2(a), 70 Stat. 530; Pub. L. 85-866, title I, Secs. 39(a),
101(a), (b), Sept. 2, 1958, 72 Stat. 1638, 1674; Pub. L. 86-779,
Sec. 10(b)(2), (3), Sept. 14, 1960, 74 Stat. 1009; Pub. L. 88-272,
title II, Sec. 229(a)(1), (2), (b), Feb. 26, 1964, 78 Stat. 99;
Pub. L. 91-172, title V, Sec. 511(c)(2), Dec. 30, 1969, 83 Stat.
637; Pub. L. 94-455, title XIV, Sec. 1402(b)(1)(N), (2), title XIX,
Secs. 1901(a)(110)(A), (B)(i), (C), (b)(1)(V), (6)(B), (33)(I),
(J), (N), 1906(b)(13)(A), title XXI, Sec. 2137(a)-(c), Oct. 4,
1976, 90 Stat. 1732, 1783, 1792, 1794, 1801, 1802, 1834, 1930,
1931; Pub. L. 95-600, title III, Secs. 301(b)(11), 362(c), title
VII, Sec. 701(s)(2), Nov. 6, 1978, 92 Stat. 2822, 2851, 2911; Pub.
L. 96-222, title I, Sec. 104(a)(3)(B), Apr. 1, 1980, 94 Stat. 215;
Pub. L. 97-424, title V, Sec. 547(b)(2), Jan. 6, 1983, 96 Stat.
2199; Pub. L. 98-369, div. A, title I, Sec. 55(a), title X, Secs.
1001(b)(11), (e), 1071(a)(2)-(4), (b)(1), July 18, 1984, 98 Stat.
571, 1011, 1012, 1049, 1050, 1052; Pub. L. 99-514, title III, Sec.
311(b)(1), title VI, Secs. 631(e)(11), 651(b)(1)(A), (2), (3),
655(a)(1), (2), title XI, Sec. 1173(b)(1)(B), title XV, Sec.
1511(c)(6), title XVIII, Secs. 1804(c)(1)-(5), 1878(j), Oct. 22,
1986, 100 Stat. 2219, 2274, 2296, 2298, 2299, 2515, 2745, 2799,
2800, 2905; Pub. L. 100-647, title I, Secs. 1006(l)(1)(A), (3),
(4), (7)-(10), 1011B(h)(4), 1018(p), Nov. 10, 1988, 102 Stat.
3413-3415, 3491, 3585; Pub. L. 101-239, title VII, Sec. 7204(b)(1),
(c)(1), Dec. 19, 1989, 103 Stat. 2334, 2335; Pub. L. 103-66, title
XIII, Sec. 13221(c)(1), Aug. 10, 1993, 107 Stat. 477; Pub. L.
104-188, title I, Sec. 1602(b)(3), Aug. 20, 1996, 110 Stat. 1833;
Pub. L. 105-34, title XI, Sec. 1122(c)(2), (3), title XII, Sec.
1254(b)(2), Aug. 5, 1997, 111 Stat. 977, 1033; Pub. L. 106-170,
title V, Sec. 566(a)(1), (c), Dec. 17, 1999, 113 Stat. 1950.)
-REFTEXT-
REFERENCES IN TEXT
Section 246(c)(3) of this title, referred to in subsec.
(b)(4)(C), was amended by Pub. L. 105-34, title X, Sec. 1015(b)(2),
Aug. 5, 1997, 111 Stat. 922, to strike out subpar. (B) and
redesignate subpar. (C) as (B).
The Investment Company Act of 1940, referred to in subsec. (d),
is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as amended,
which is classified generally to subchapter I (Sec. 80a-1 et seq.)
of chapter 2D of Title 15, Commerce and Trade. For complete
classification of this Act to the Code, see section 80a-51 of Title
15 and Tables.
-MISC1-
AMENDMENTS
1999 - Subsec. (c)(3). Pub. L. 106-170, Sec. 566(a)(1), added
par. (3).
Subsec. (e)(1). Pub. L. 106-170, Sec. 566(c), inserted at end "If
the determination under subparagraph (A) is solely as a result of
the failure to meet the requirements of subsection (a)(2), the
preceding sentence shall also apply for purposes of applying
subsection (a)(2) to the non-RIC year and the amount referred to in
paragraph (2)(A)(i) shall be the portion of the accumulated
earnings and profits which resulted in such failure."
1997 - Subsec. (b)(3)(D)(iii). Pub. L. 105-34, Sec. 1254(b)(2),
substituted "by the difference between the amount of such
includible gains and the tax deemed paid by such shareholder in
respect of such shares under clause (ii)." for "by 65 percent of so
much of such amounts as equals the amount subject to tax in
accordance with section 1201(a)."
Subsec. (b)(10). Pub. L. 105-34, Sec. 1122(c)(2), added par.
(10).
Subsec. (c)(2). Pub. L. 105-34, Sec. 1122(c)(3), inserted ",
without regard to any net reduction in the value of any stock of a
passive foreign investment company with respect to which an
election under section 1296(k) is in effect occurring after October
31 of such year," after "October 31 of such year".
1996 - Subsec. (b)(5)(C). Pub. L. 104-188 struck out subpar. (C).
Prior to amendment, subpar. (C) read as follows:
"(C) Interest on certain loans used to acquire employer
securities. - For purposes of this section -
"(i) 50 percent of the amount of any loan of the regulated
investment company which qualifies as a securities acquisition
loan (as defined in section 133) shall be treated as an
obligation described in section 103(a), and
"(ii) 50 percent of the interest received on such loan shall be
treated as interest excludable from gross income under section
103."
1993 - Subsec. (b)(3)(D)(iii). Pub. L. 103-66 substituted "65
percent" for "66 percent".
1989 - Subsec. (b)(9). Pub. L. 101-239, Sec. 7204(c)(1), added
par. (9).
Subsec. (f). Pub. L. 101-239, Sec. 7204(b)(1), added subsec. (f).
1988 - Subsec. (a). Pub. L. 100-647, Sec. 1006(l)(8), inserted at
end "The Secretary may waive the requirements of paragraph (1) for
any taxable year if the regulated investment company establishes to
the satisfaction of the Secretary that it was unable to meet such
requirements by reason of distributions previously made to meet the
requirements of section 4982."
Subsec. (b)(3)(C). Pub. L. 100-647, Sec. 1006(l)(4), substituted
"net capital loss or net long-term capital loss" for "net capital
loss" in two places in third sentence, and "computing the taxable
income of the regulated investment company" for "computing
regulated investment company taxable income" in fourth sentence.
Subsec. (b)(5)(C). Pub. L. 100-647, Sec. 1011B(h)(4), substituted
"section" for "paragraph".
Subsec. (b)(6). Pub. L. 100-647, Sec. 1006(l)(1)(A), redesignated
par. (6), relating to time certain dividends are taken into
account, as (7).
Subsec. (b)(7). Pub. L. 100-647, Sec. 1006(l)(9), substituted "in
October, November, or December" for "in December" and "in such a
month" for "in such month", in introductory text, "on December 31
of such calendar year" for "on such date" in subpars. (A) an (B),
and "during January" for "before February 1" in last sentence.
Pub. L. 100-647, Sec. 1006(l)(1)(A), redesignated par. (6),
relating to time certain dividends are taken into account, as (7).
Subsec. (b)(8). Pub. L. 100-647, Sec. 1006(l)(7), added par. (8).
Subsec. (c)(2). Pub. L. 100-647, Sec. 1006(l)(3), amended par.
(2) generally. Prior to amendment, par. (2) read as follows: "A
regulated investment company shall be treated as having sufficient
earnings and profits to treat as a dividend any distribution (other
than in a redemption to which section 302(a) applies) which is
treated as a dividend by such company. The preceding sentence shall
not apply to the extent that the amount distributed during any
calendar year by the company exceeds the required distribution for
such calendar year (as determined under section 4982)."
Subsec. (e)(1). Pub. L. 100-647, Secs. 1006(l)(10), 1018(p),
amended par. (1) identically, substituting "subsection (a)(2)" for
"subsection (a)(3)" in last sentence.
1986 - Subsec. (a)(2), (3). Pub. L. 99-514, Sec. 1878(j)(1),
redesignated par. (3) as (2) and struck out former par. (2) which
read as follows: "the investment company complies for such year
with regulations prescribed by the Secretary for the purpose of
ascertaining the actual ownership of its outstanding stock, and".
Subsec. (b)(1). Pub. L. 99-514, Sec. 1878(j)(2), substituted last
sentence for former last sentence which read as follows: "In the
case of a regulated investment company which is a personal holding
company (as defined in section 542), that tax shall be computed at
the highest rate of tax specified in section 11(b)."
Subsec. (b)(3)(C). Pub. L. 99-514, Sec. 655(a)(1), substituted
"60 days" for "45 days".
Pub. L. 99-514, Sec. 651(b)(3), inserted provision for
determination of the amount of the net capital gain for a taxable
year (to which an election under section 4982(e)(4) does not apply)
and made such provision applicable also for purposes of computing
regulated investment company taxable income.
Subsec. (b)(3)(D)(i). Pub. L. 99-514, Sec. 655(a)(1), substituted
"60 days" for "45 days".
Subsec. (b)(3)(D)(iii). Pub. L. 99-514, Sec. 311(b)(1),
substituted "66 percent" for "72 percent".
Subsec. (b)(4). Pub. L. 99-514, Sec. 1804(c)(5), substituted "6
months or less" for "less than 31 days" in heading.
Subsec. (b)(4)(B)(ii). Pub. L. 99-514, Sec. 1804(c)(1),
substituted "6 months or less" for "less than 31 days".
Subsec. (b)(4)(C). Pub. L. 99-514, Sec. 1804(c)(2), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: "For purposes of this paragraph, the rules of paragraphs
(3) and (4) of section 246(c) shall apply in determining the period
for which the taxpayer held any share of stock; except that for the
number of days specified in subparagraph (B) of section 246(c)(3)
there shall be substituted -
"(i) '6 months' for purposes of subparagraph (A), and
"(ii) '30 days' for purposes of subparagraph (B)."
Subsec. (b)(4)(D). Pub. L. 99-514, Sec. 1804(c)(3), substituted
"subparagraphs (A) and (B)" for "subparagraph (A)".
Subsec. (b)(4)(E). Pub. L. 99-514, Sec. 1804(c)(4), added subpar.
(E).
Subsec. (b)(5)(A). Pub. L. 99-514, Sec. 655(a)(2), substituted
"60 days" for "45 days".
Subsec. (b)(5)(C). Pub. L. 99-514, Sec. 1173(b)(1)(B), added
subpar. (C).
Subsec. (b)(6). Pub. L. 99-514, Sec. 651(b)(1)(A), added par. (6)
relating to time certain dividends are taken into account.
Pub. L. 99-514, Sec. 631(e)(11), added par. (6) relating to
inapplicability of section 311(b) to certain distributions.
Subsec. (c). Pub. L. 99-514, Sec. 651(b)(2), amended subsec. (c)
generally, designating existing provisions as par. (1), inserting
heading, and adding par. (2).
Subsec. (e)(3)(A). Pub. L. 99-514, Sec. 1511(c)(6), substituted
"the underpayment rate established under section 6621" for "the
annual rate established under section 6621".
1984 - Subsec. (a)(3). Pub. L. 98-369, Sec. 1071(a)(3), added
par. (3).
Subsec. (b)(1). Pub. L. 98-369, Sec. 1071(a)(2), inserted
provision that in the case of a regulated investment company which
is a personal holding company (as defined in section 542), that tax
shall be computed at the highest rate of tax specified in section
11.
Subsec. (b)(2)(F). Pub. L. 98-369, Sec. 1071(b)(1), added subpar.
(F).
Subsec. (b)(3)(B). Pub. L. 98-369, Sec. 1001(b)(11), (e),
substituted "6 months" for "1 year", applicable to property
acquired after June 22, 1984, and before Jan. 1, 1988. See
Effective Date of 1984 Amendment note below.
Subsec. (b)(4)(A)(i). Pub. L. 98-369, Sec. 55(a)(1), substituted
"subparagraph (B) or (D) of paragraph (3) provides that any amount
with respect to any share is to be treated as long-term capital
gain" for "under subparagraph (B) or (D) of paragraph (3) a
shareholder of a regulated investment company is required, with
respect to any share, to treat any amount as a long-term capital
gain".
Subsec. (b)(4)(A)(ii). Pub. L. 98-369, Sec. 55(a)(1), substituted
"6 months or less" for "less than 31 days".
Subsec. (b)(4)(C). Pub. L. 98-369, Sec. 55(a)(2), substituted
"the rules of paragraphs (3) and (4) of section 246(c) shall apply
in determining the period for which the taxpayer held any share of
stock;" for "the rules of section 246(c)(3) shall apply in
determining whether any share of stock has been held for less than
31 days;" and substituted provisions dealing with the applicable
number of days for former provisions which set forth different
applicable days.
Subsec. (b)(4)(D). Pub. L. 98-369, Sec. 55(a)(3), added subpar.
(D).
Subsec. (e). Pub. L. 98-369, Sec. 1071(a)(4), added subsec. (e).
1983 - Subsec. (b)(5). Pub. L. 97-424 substituted "section
103(a)" for "section 103(a)(1)" wherever appearing.
1980 - Subsec. (b)(3)(D)(iii). Pub. L. 96-222 substituted "72
percent" for "70 percent".
1978 - Subsec. (b)(1). Pub. L. 95-600, Sec. 301(b)(11),
substituted "a tax" for "a normal tax and surtax".
Subsec. (b)(3)(C). Pub. L. 95-600, Sec. 362(c), inserted ",
except that, if there is an increase in the excess described in
subparagraph (A) of this paragraph for such year which results from
a determination (as defined in section 860(e)), such designation
may be made with respect to such increase at any time before the
expiration of 120 days after the date of such determination" after
"amount so designated".
Subsec. (b)(4). Pub. L. 95-600, Sec. 701(s)(2), designated first
sentence, including subpars. (A) and (B), as subpar. (A), cls. (i)
and (ii); added subpar. (A) heading and substituted "shall, to the
extent of the amount described in clause (i), be treated as a
long-term capital loss" for "shall, to the extent of the amount
described in subparagraph (A) of this paragraph, be treated as loss
from the sale or exchange of a capital asset held for more than 1
year"; added subpar. (B); and designated second sentence as subpar.
(C).
1976 - Subsec. (a)(1). Pub. L. 94-455, Secs. 1901(b)(6)(B),
2137(a), designated existing provisions as introductory material
and subpar. (A) and added subpar. (B).
Subsec. (a)(2). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (b)(1). Pub. L. 94-455, Sec. 1901(b)(1)(V), struck out
provision relating to the computation of the normal tax under
section 11 of this title.
Subsec. (b)(2)(A). Pub. L. 94-455, Sec. 1901(b)(33)(I),
substituted "the amount of the net capital gain, if any" for "the
excess, if any, of the net long-term capital gain over the
short-term capital loss".
Subsec. (b)(2)(D). Pub. L. 94-455, Sec. 2137(b), inserted
reference to exempt-interest dividends.
Subsec. (b)(3)(A). Pub. L. 94-455, Sec. 1901(b)(33)(J)(i), among
other changes, struck out reference to the sum of the net
short-term capital loss.
Subsec. (b)(3)(B). Pub. L. 94-455, Sec. 1402(b)(2), provided that
"9 months" would be changed to "1 year".
Pub. L. 94-455, Sec. 1402(b)(1)(N), provided that "6 months"
would be changed to "9 months" for taxable years beginning in 1977.
Subsec. (b)(3)(C). Pub. L. 94-455, Sec. 1901(a)(110)(A),
(b)(33)(J)(ii), substituted "net capital gain" for "excess of the
net long-term capital gain over the net short-term capital loss" in
two places and struck out provision requiring for purpose of the
deduction for capital gains dividends paid, the deductions shall in
the case of a taxable year beginning before Jan. 1, 1975, first be
made from the amount subject to tax in accordance with section
1201(a)(1)(B), to the extent thereof, and then from the amount
subject to tax in accordance with section 1201(a)(1)(A).
Subsec. (b)(3)(D)(iii). Pub. L. 94-455, Sec. 1901(a)(110)(B)(i),
struck out "by 75 percent of so much of such amounts as equals the
amount subject to tax in accordance with section 1201(a)(1)(A) and"
after "his long term capital gains," and "(72 percent in the case
of a taxable year beginning after December 31, 1969, and before
January 1, 1971)" after "by 70 percent" and substituted "section
1201(a)" for "section 1201(a)(1)(B) or (2)".
Subsec. (b)(3)(D)(v). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (b)(4). Pub. L. 94-455, Sec. 1402(b)(2), provided that "9
months" would be changed to "1 year".
Pub. L. 94-455, Sec. 1402(b)(1)(N), provided that "6 months"
would be changed to "9 months" for taxable years beginning in 1977.
Subsec. (b)(5). Pub. L. 94-455, Sec. 2137(c), added par. (5).
Subsec. (d). Pub. L. 94-455, Sec. 1901(a)(110)(C), (b)(33)(N),
inserted in par. (1) "(15 U.S.C. 80a-1 and following)" after
"Investment company Act of 1940" and substituted in provision
following par. (2) "capital gain net income" for "net capital
gain".
1969 - Subsec. (b)(3)(A). Pub. L. 91-172, Sec. 511(c)(2)(A),
substituted "determined as provided in section 1201(a), on" for "of
25 percent of".
Subsec. (b)(3)(C). Pub. L. 91-172, Sec. 511(c)(2)(B), inserted
provision requiring for the purposes of the deduction for capital
gains dividends paid the deduction shall, in the case of a taxable
year beginning before Jan. 1, 1975, first be made from the amount
subject to tax in accordance with section 1201(a)(1)(B), to the
extent thereof, and then from the amount subject to tax in
accordance with section 1201(a)(1)(A).
Subsec. (b)(3)(D). Pub. L. 91-172, Sec. 511(c)(2)(C), (D), struck
out "of 25 percent" in cl. (ii), substituted reference in cl. (iii)
to the increase of the adjusted basis of shares in the hands of the
shareholder, with respect to the amounts required by this subpar.,
by 75 percent of so much of such amounts as equals the amount
subject to tax in accordance with section 1201(a)(1)(A) and by 70
percent (72 percent in the case of a taxable year beginning after
Dec. 31, 1969, and before Jan. 1, 1971) of so much of such amounts
as equals the amount subject to tax in accordance with section
1201(a)(1)(B) or (2), for reference to the increase of the adjusted
basis of shares in the hand of the shareholder by 75 percent of the
amounts required by this subpar. to be included in computing his
long-term capital gains.
1964 - Subsec. (b)(3)(C), (D)(i). Pub. L. 88-272, Sec. 229(a)(1),
(2), substituted "45 days" for "30 days".
Subsec. (d). Pub. L. 88-272, Sec. 229(b), added subsec. (d).
1960 - Subsec. (a). Pub. L. 86-779, Sec. 10(b)(2), substituted
"this part" for "this subchapter".
Subsec. (b)(3)(C). Pub. L. 86-779, Sec. 10(b)(3), substituted
"For purposes of this part, a capital gain dividend is" for "A
capital gain dividend means".
1958 - Subsec. (a). Pub. L. 85-866, Sec. 101(a), inserted "(other
than subsection (c) of this section)".
Subsec. (b)(4). Pub. L. 85-866, Sec. 39(a), added par. (4).
Subsec. (c). Pub. L. 85-866, Sec. 101(b), inserted sentence
defining regulated investment company.
1956 - Subsec. (b)(3)(D). Act July 11, 1956, added subpar. (D).
EFFECTIVE DATE OF 1999 AMENDMENT
Pub. L. 106-170, title V, Sec. 566(d), Dec. 17, 1999, 113 Stat.
1950, provided that: "The amendments made by this section [amending
this section and section 857 of this title] shall apply to
distributions after December 31, 2000."
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 1122(c)(2), (3) of Pub. L. 105-34 applicable
to taxable years of United States persons beginning after Dec. 31,
1997, and to taxable years of foreign corporations ending with or
within such taxable years of United States persons, see section
1124 of Pub. L. 105-34, set out as a note under section 532 of this
title.
Section 1263 of title XII of Pub. L. 105-34 provided that: "The
amendments made by this part [probably means subtitle D (Secs.
1251-1263) of title XII of Pub. L. 105-34, amending this section
and sections 856 and 857 of this title] shall apply to taxable
years beginning after the date of the enactment of this Act [Aug.
5, 1997]."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1602(b)(1) of Pub. L. 104-188 applicable to
loans made after Aug. 20, 1996, with exception and provisions
relating to certain refinancings, see section 1602(c) of Pub. L.
104-188, set out as an Effective Date of Repeal note under former
section 133 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to taxable years beginning
on or after Jan. 1, 1993, see section 13221(d) of Pub. L. 103-66
set out as a note under section 11 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7204(b)(2) of Pub. L. 101-239 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to charges incurred after October 3, 1989, in taxable years ending
after such date."
Section 7204(c)(2) of Pub. L. 101-239 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to dividends in cases where the stock becomes ex-dividend after the
date of the enactment of this Act [Dec. 19, 1989]."
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1006(l)(9) of Pub. L. 100-647 provided that the amendment
made by that section is effective with respect to dividends
declared in 1988 and subsequent calendar years.
Amendment by sections 1006(l)(1)(A), (3), (4), (7), (8), (10),
1011B(h)(4), and 1018(p) of Pub. L. 100-647 effective, except as
otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 311(b)(1) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 311(c) of
Pub. L. 99-514, set out as a note under section 1201 of this title.
Amendment by section 631(e)(11) of Pub. L. 99-514 applicable to
any distribution in complete liquidation, and any sale or exchange,
made by a corporation after July 31, 1986, unless such corporation
is completely liquidated before Jan. 1, 1987, any transaction
described in section 338 of this title for which the acquisition
date occurs after Dec. 31, 1986, and any distribution, not in
complete liquidation, made after Dec. 31, 1986, with exceptions and
special and transitional rules, see section 633 of Pub. L. 99-514,
set out as an Effective Date note under section 336 of this title.
Amendment by section 651(b)(1)(A), (2), (3) of Pub. L. 99-514
applicable to calendar years beginning after Dec. 31, 1986, see
section 651(d) of Pub. L. 99-514, set out as an Effective Date note
under section 4982 of this title.
Section 655(b) of Pub. L. 99-514 provided that: "The amendments
made by subsection (a) [amending this section and sections 853 to
855 of this title] shall apply to taxable years beginning after the
date of the enactment of this Act [Oct. 22, 1986]."
Section 1173(c)(2)(A) of Pub. L. 99-514 provided that: "The
amendments made by subsection (b)(1) [amending this section and
former section 133 of this title] shall apply to loans used to
acquire employer securities after the date of the enactment of this
Act [Oct. 22, 1986], including loans used to refinance loans used
to acquire employer securities before such date if such loans were
used to acquire employer securities after May 23, 1984."
Amendment by section 1511(c)(6) of Pub. L. 99-514 applicable for
purposes of determining interest for periods after Dec. 31, 1986,
see section 1511(d) of Pub. L. 99-514, set out as a note under
section 47 of this title.
Section 1804(c)(6) of Pub. L. 99-514 provided that: "The
amendments made by this subsection [amending this section] shall
apply to stock with respect to which the taxpayer's holding period
begins after March 28, 1985."
Amendment by section 1878(j) of Pub. L. 99-514 effective, except
as otherwise provided, as if included in the provisions of the Tax
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note
under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 55(c) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section and section 857 of this
title] shall apply to losses incurred with respect to shares of
stock and beneficial interests with respect to which the taxpayer's
holding period begins after the date of the enactment of this Act
[July 18, 1984]."
Amendment by section 1001(b)(11) of Pub. L. 98-369 applicable to
property acquired after June 22, 1984, and before Jan. 1, 1988, see
section 1001(e) of Pub. L. 98-369, set out as a note under section
166 of this title.
Section 1071(a)(5) of Pub. L. 98-369, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(A) In general. - Except as otherwise provided in this
paragraph, the amendments made by this subsection [amending this
section and section 851 of this title] shall apply to taxable years
beginning after December 31, 1982.
"(B) Investment companies which were regulated investment
companies for years ending before november 8, 1983. - In the case
of any investment company to which the provisions of part I of
subchapter M of chapter 1 of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] applied for any taxable year ending before
November 8, 1983, for purposes of section 852(a)(3)(B) of the
Internal Revenue Code of 1986 (as amended by this subsection), no
earnings and profits accumulated in any taxable year ending before
January 1, 1984, shall be taken into account.
"(C) Investment companies beginning business in 1983. - In the
case of an investment company which began business in 1983 (and was
not a successor corporation), earnings and profits accumulated
during its first taxable year shall not be taken into account for
purposes of section 852(a)(3)(B) of such Code (as so amended).
"(D) Investment companies registering before november 8, 1983. -
In the case of any investment company -
"(i) which, during the period after December 31, 1981, and
before November 8, 1983 -
"(I) was engaged in the active conduct of a trade or
business,
"(II) sold substantially all of its operating assets, and
"(III) registered under the Investment Company Act of 1940
[15 U.S.C. Sec. 80a-1 et seq.] as either a management company
or a unit investment trust, and
"(ii) to which the provisions of part I of subchapter M of
chapter 1 of the Internal Revenue Code of 1986 applied for its
first taxable year beginning after November 8, 1983,
for purposes of section 852(a)(3)(A) of such Code (as amended by
paragraph (3)), the provisions of part I of subchapter M of chapter
1 of such Code shall be treated as applying to such investment
company for its first taxable year ending after November 8, 1983.
For purposes of the preceding sentence, all members of an
affiliated group (as defined in section 1504(a) of such Code)
filing a consolidated return shall be treated as 1 taxpayer."
Section 1071(b)(2) of Pub. L. 98-369 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to taxable years beginning after December 31, 1978."
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 301(b)(11) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 301(c) of
Pub. L. 95-600, set out as a note under section 11 of this title.
Amendment by section 362(c) of Pub. L. 95-600 applicable with
respect to determinations (as defined in section 860(e) of this
title) after Nov. 6, 1978, see section 362(e) of Pub. L. 95-600,
set out as an Effective Date note under section 860 of this title.
Amendment by section 701(s)(2) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1975, see section 701(s)(3)
of Pub. L. 95-600, set out as a note under section 851 of this
title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1402(b)(1) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment
made by that section is effective with respect to taxable years
beginning after Dec. 31, 1977.
Amendment by section 1901(a)(110)(A), (C), (b)(1)(V), (6)(B),
(33)(I), (J), (N) of Pub. L. 94-455 effective for taxable years
beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as an Effective Date of 1976 Amendment note under
section 2 of this title.
Section 1901(a)(110)(B)(ii) of Pub. L. 94-455, as amended by Pub.
L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"The amendment made by clause (i) [amending this section] shall not
be considered to affect the amount of any increase in the basis of
stock under the provisions of section 852(b)(3)(D)(iii) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] which is based
upon amounts subject to tax under section 1201 of such Code
[section 1201 of this title] in taxable years beginning before
January 1, 1975."
Section 2137(e) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section and sections 103 and
265 of this title] shall apply to taxable years beginning after
December 31, 1975."
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable with respect to taxable
years beginning after Dec. 31, 1969, see section 511(d) of Pub. L.
91-172, set out as an Effective Date note under section 1201 of
this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 229(c) of Pub. L. 88-272 provided that: "The amendments
made by subsection (a) [amending this section and sections 853,
854, and 855 of this title] shall apply to taxable years of
regulated investment companies ending on or after the date of the
enactment of this Act [Feb. 26, 1964]. The amendment made by
subsection (b) [amending this section] shall apply to taxable years
of regulated investment companies ending after December 31, 1963."
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment of section by Pub. L. 86-779 applicable with respect to
taxable years of real estate investment trusts beginning after Dec.
31, 1960, see section 10(k) of Pub. L. 86-779, set out as an
Effective Date note under section 856 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Section 39(b) of Pub. L. 85-866 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to taxable years ending after December 31, 1957, but only
with respect to shares of stock acquired after December 31, 1957."
Section 101(c) of Pub. L. 85-866 provided that: "The amendments
made by this section [amending this section] shall apply with
respect to taxable years of regulated investment companies
beginning on or after March 1, 1958."
EFFECTIVE DATE OF 1956 AMENDMENT
Section 2(b) of act July 11, 1956, provided that: "The amendment
made by this section [amending this section] shall apply only with
respect to taxable years of regulated investment companies
beginning after December 31, 1956."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 57, 443, 774, 853, 854,
855, 860, 891, 1201, 4982 of this title.
-FOOTNOTE-
(!1) So in original. Probably should be capitalized.
(!2) See References in Text note below.
-End-
-CITE-
26 USC Sec. 853 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter M - Regulated Investment Companies and Real Estate
Investment Trusts
PART I - REGULATED INVESTMENT COMPANIES
-HEAD-
Sec. 853. Foreign tax credit allowed to shareholders
-STATUTE-
(a) General rule
A regulated investment company -
(1) more than 50 percent of the value (as defined in section
851(c)(4)) of whose total assets at the close of the taxable year
consists of stock or securities in foreign corporations, and
(2) which meets the requirements of section 852(a) for the
taxable year,
may, for such taxable year, elect the application of this section
with respect to income, war profits, and excess profits taxes
described in section 901(b)(1), which are paid by the investment
company during such taxable year to foreign countries and
possessions of the United States.
(b) Effect of election
If the election provided in subsection (a) is effective for a
taxable year -
(1) the regulated investment company -
(A) shall not, with respect to such taxable year, be allowed
a deduction under section 164(a) or a credit under section 901
for taxes to which subsection (a) is applicable, and
(B) shall be allowed as an addition to the dividends paid
deduction for such taxable year the amount of such taxes;
(2) each shareholder of such investment company shall -
(A) include in gross income and treat as paid by him his
proportionate share of such taxes, and
(B) treat as gross income from sources within the respective
foreign countries and possessions of the United States, for
purposes of applying subpart A of part III of subchapter N, the
sum of his proportionate share of such taxes and the portion of
any dividend paid by such investment company which represents
income derived from sources within foreign countries or
possessions of the United States.
(c) Notice to shareholders
The amounts to be treated by the shareholder, for purposes of
subsection (b)(2), as his proportionate share of -
(1) taxes paid to any foreign country or possession of the
United States, and
(2) gross income derived from sources within any foreign
country or possession of the United States,
shall not exceed the amounts so designated by the company in a
written notice mailed to its shareholders not later than 60 days
after the close of its taxable year.
(d) Manner of making election and notifying shareholders
The election provided in subsection (a) and the notice to
shareholders required by subsection (c) shall be made in such
manner as the Secretary may prescribe by regulations.
(e) Treatment of taxes not allowed as a credit under section 901(k)
This section shall not apply to any tax with respect to which the
regulated investment company is not allowed a credit under section
901 by reason of section 901(k).
(f) Cross references
(1) For treatment by shareholders of taxes paid to foreign
countries and possessions of the United States, see section
164(a) and section 901.
(2) For definition of foreign corporation, see section
7701(a)(5).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 272; Pub. L. 88-272, title II,
Sec. 229(a)(3), Feb. 26, 1964, 78 Stat. 99; Pub. L. 94-455, title
XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L.
99-514, title VI, Sec. 655(a)(3), Oct. 22, 1986, 100 Stat. 2299;
Pub. L. 105-34, title X, Sec. 1053(b), Aug. 5, 1997, 111 Stat. 943;
Pub. L. 105-206, title VI, Sec. 6010(k)(1), (2), July 22, 1998, 112
Stat. 815.)
-MISC1-
AMENDMENTS
1998 - Subsec. (c). Pub. L. 105-206, Sec. 6010(k)(2), struck out
at end "Such notice shall also include the amount of such taxes
which (without regard to the election under this section) would not
be allowable as a credit under section 901(a) to the regulated
investment company by reason of section 901(k)."
Subsecs. (e), (f). Pub. L. 105-206, Sec. 6010(k)(1), added
subsec. (e) and redesignated former subsec. (e) as (f).
1997 - Subsec. (c). Pub. L. 105-34 inserted at end "Such notice
shall also include the amount of such taxes which (without regard
to the election under this section) would not be allowable as a
credit under section 901(a) to the regulated investment company by
reason of section 901(k)."
1986 - Subsec. (c). Pub. L. 99-514 substituted "60 days" for "45
days".
1976 - Subsec. (d). Pub. L. 94-455 struck out "or his delegate"
after "Secretary".
1964 - Subsec. (c). Pub. L. 88-272 substituted "45 days" for "30
days".
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1053(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section and section 901 of this
title] shall apply to dividends paid or accrued more than 30 days
after the date of the enactment of this Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Oct. 22, 1986, see section 655(b) of Pub. L. 99-514, set out
as a note under section 852 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by Pub. L. 88-272 applicable to taxable years of
regulated investment companies ending on or after Feb. 26, 1964,
see section 229(c) of Pub. L. 88-272, set out as a note under
section 852 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 855, 901 of this title.
-End-
-CITE-
26 USC Sec. 854 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter M - Regulated Investment Companies and Real Estate
Investment Trusts
PART I - REGULATED INVESTMENT COMPANIES
-HEAD-
Sec. 854. Limitations applicable to dividends received from
regulated investment company
-STATUTE-
(a) Capital gain dividend
For purposes of section 1(h)(11) (relating to maximum rate of tax
on dividends) and section 243 (relating to deductions for dividends
received by corporations), a capital gain dividend (as defined in
section 852(b)(3)) received from a regulated investment company
shall not be considered as a dividend.
(b) Other dividends
(1) Amount treated as dividend
(A) Deduction under section 243
In any case in which -
(i) a dividend is received from a regulated investment
company (other than a dividend to which subsection (a)
applies), and
(ii) such investment company meets the requirements of
section 852(a) for the taxable year during which it paid such
dividend,
then, in computing any deduction under section 243, there shall
be taken into account only that portion of such dividend
designated under this subparagraph by the regulated investment
company and such dividend shall be treated as received from a
corporation which is not a 20-percent owned corporation.
(B) Maximum rate under section 1(h)
(i) In general
If the aggregate dividends received by a regulated
investment company during any taxable year are less than 95
percent of its gross income, then, in computing the maximum
rate under section 1(h)(11), rules similar to the rules of
subparagraph (A) shall apply.
(ii) Gross income
For purposes of clause (i), in the case of 1 or more sales
or other dispositions of stock or securities, the term "gross
income" includes only the excess of -
(I) the net short-term capital gain from such sales or
dispositions, over
(II) the net long-term capital loss from such sales or
dispositions.
(iii) Dividends from real estate investment trusts
For purposes of clause (i) -
(I) paragraph (3)(B)(ii) shall not apply, and
(II) in the case of a distribution from a trust described
in such paragraph, the amount of such distribution which is
a dividend shall be subject to the limitations under
section 857(c).
(iv) Dividends from qualified foreign corporations
For purposes of clause (i), dividends received from
qualified foreign corporations (as defined in section
1(h)(11)) shall also be taken into account in computing
aggregate dividends received.
(C) Limitation
The aggregate amount which may be designated as dividends
under subparagraph (A) or (B) shall not exceed the aggregate
dividends received by the company for the taxable year.
(2) Notice to shareholders
The amount of any distribution by a regulated investment
company which may be taken into account as a dividend for
purposes of the maximum rate under section 1(h)(11) and the
deduction under section 243 shall not exceed the amount so
designated by the company in a written notice to its shareholders
mailed not later than 60 days after the close of its taxable
year.
(3) Aggregate dividends
For purposes of this subsection -
(A) In general
In computing the amount of aggregate dividends received,
there shall only be taken into account dividends received from
domestic corporations.
(B) Dividends
For purposes of subparagraph (A), the term "dividend" shall
not include any distribution from -
(i) a corporation which, for the taxable year of the
corporation in which the distribution is made, or for the
next preceding taxable year of the corporation, is a
corporation exempt from tax under section 501 (relating to
certain charitable, etc., organizations) or section 521
(relating to farmers' cooperative associations), or
(ii) a real estate investment trust which, for the taxable
year of the trust in which the dividend is paid, qualifies
under part II of subchapter M (section 856 and following).
(C) Limitations on dividends from regulated investment
companies
In determining the amount of any dividend for purposes of
this paragraph, a dividend received from a regulated investment
company shall be subject to the limitations prescribed in this
section.
(4) Special rule for computing deduction under section 243
For purposes of subparagraph (A) of paragraph (1), an amount
shall be treated as a dividend for the purpose of paragraph (1)
only if a deduction would have been allowable under section 243
to the regulated investment company determined -
(A) as if section 243 applied to dividends received by a
regulated investment company,
(B) after the application of section 246 (but without regard
to subsection (b) thereof), and
(C) after the application of section 246A.
(5) Coordination with section 1(h)(11)
For purposes of paragraph (1)(B), an amount shall be treated as
a dividend only if the amount is qualified dividend income
(within the meaning of section 1(h)(11)(B)).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 273; Pub. L. 88-272, title II,
Secs. 201(d)(8)-(10), 229(a)(4), Feb. 26, 1964, 78 Stat. 32, 99;
Pub. L. 96-223, title IV, Sec. 404(b)(6), Apr. 2, 1980, 94 Stat.
307; Pub. L. 97-34, title III, Sec. 302(c)(4), (d)(1), Aug. 13,
1981, 95 Stat. 272, 274; Pub. L. 98-369, div. A, title I, Secs.
16(a), 52(a)-(c), July 18, 1984, 98 Stat. 505, 564, 565; Pub. L.
99-514, title VI, Secs. 612(b)(6), 655(a)(4), Oct. 22, 1986, 100
Stat. 2250, 2299; Pub. L. 100-203, title X, Sec. 10221(d)(3), Dec.
22, 1987, 101 Stat. 1330-409; Pub. L. 100-647, title I, Sec.
1006(b)(2), Nov. 10, 1988, 102 Stat. 3393; Pub. L. 108-27, title
III, Sec. 302(c), May 28, 2003, 117 Stat. 762.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 303 of Pub. L. 108-27,
see Effective and Termination Dates of 2003 Amendment note below.
-MISC1-
AMENDMENTS
2003 - Subsec. (a). Pub. L. 108-27, Secs. 302(c)(1), 303,
temporarily inserted "section 1(h)(11) (relating to maximum rate of
tax on dividends) and" after "For purposes of". See Effective and
Termination Dates of 2003 Amendment note below.
Subsec. (b)(1)(B). Pub. L. 108-27, Secs. 302(c)(2), 303,
temporarily added subpar. (B). Former subpar. (B) redesignated (C).
See Effective and Termination Dates of 2003 Amendment note below.
Subsec. (b)(1)(C). Pub. L. 108-27, Secs. 302(c)(2), (3), 303,
temporarily redesignated subpar. (B) as (C) and substituted
"subparagraph (A) or (B)" for "subparagraph (A)". See Effective and
Termination Dates of 2003 Amendment note below.
Subsec. (b)(2). Pub. L. 108-27, Secs. 302(c)(4), 303, temporarily
inserted "the maximum rate under section 1(h)(11) and" after "for
purposes of". See Effective and Termination Dates of 2003 Amendment
note below.
Subsec. (b)(5). Pub. L. 108-27, Secs. 302(c)(5), 303, temporarily
added par. (5). See Effective and Termination Dates of 2003
Amendment note below.
1988 - Subsec. (b)(3). Pub. L. 100-647 substituted "Aggregate
dividends" for "Definitions" in heading and amended text generally,
substituting subpars. (A) to (C) for former subpars. (A) and (B).
1987 - Subsec. (b)(1)(A). Pub. L. 100-203 inserted "and such
dividend shall be treated as received from a corporation which is
not a 20-percent owned corporation" before period at end.
1986 - Subsec. (a). Pub. L. 99-514, Sec. 612(b)(6)(A), which
directed that "section 116 (relating to an exclusion for dividends
received by individuals), and" be struck out, was executed by
striking out "section 116 (relating to an exclusion for dividends
received by individuals) and" before "section 243" as the probable
intent of Congress.
Subsec. (b)(1)(B), (C). Pub. L. 99-514, Sec. 612(b)(6)(B)(i),
(ii), redesignated subpar. (C) as (B), struck out "or (B)" before
"shall not exceed", and struck out former subpar. (B), exclusion
under section 116, which read as follows: "If the aggregate
dividends received by a regulated investment company during any
taxable year are less than 95 percent of its gross income, then, in
computing the exclusion under section 116, rules similar to the
rules of subparagraph (A) shall apply."
Subsec. (b)(2). Pub. L. 99-514, Sec. 655(a)(4), substituted "60
days" for "45 days".
Pub. L. 99-514, Sec. 612(b)(6)(B)(iii), struck out "the exclusion
under section 116 and" before "the deduction under section 243".
Subsec. (b)(3)(B). Pub. L. 99-514, Sec. 612(b)(6)(B)(iv), amended
subpar. (B) generally. Prior to amendment, subpar. (B) read as
follows: "The term 'aggregate dividends received' includes only
dividends received from domestic corporations other than dividends
described in section 116(b) (relating to dividends excluded from
gross income). In determining the amount of any dividend for
purposes of this subparagraph, the rules provided in section 116(c)
(relating to certain distributions) shall apply."
1984 - Subsec. (b). Pub. L. 98-369, Sec. 16(a), repealed
amendments made by Pub. L. 97-34, Sec. 302(c). See 1981 Amendment
note below.
Subsec. (b)(1). Pub. L. 98-369, Sec. 52(a), increased the
required amount of dividends by substituting provisions directing
that in any case in which (i) a dividend is received from a
regulated investment company (other than a dividend to which
subsection (a) applies), and (ii) such investment company meets the
requirements of section 852(a) for the taxable year during which it
paid such dividend, then, in computing any deduction under section
243, there shall be taken into account only that portion of such
dividend thus designated by the regulated investment company, that
if the aggregate dividends received by a regulated investment
company during any taxable year are less than 95 percent of its
gross income, then, in computing the exclusion under section 116,
similar rules applied, and that the aggregate amount which may be
designated thus dividends shall not exceed the aggregate dividends
received by the company for the taxable year for provisions which
had directed that in the case of a dividend received from a
regulated investment company (other than a dividend to which
subsection (a) applied) (A) if such investment company met the
requirements of section 852(a) for the taxable year during which it
paid such dividend; and (B) the aggregate dividends received by
such company during such taxable year were less than 75 percent of
its gross income, then, in computing the exclusion under section
116 and the deduction under section 243, there was taken into
account only that portion of the dividend which bore the same ratio
to the amount of such dividend as the aggregate dividends received
by such company during such taxable year to its gross income for
such taxable year.
Subsec. (b)(3)(A). Pub. L. 98-369, Sec. 52(c), substituted
provisions directing that in the case of 1 or more sales or other
dispositions of stock and securities, the term "gross income"
include only the excess of (i) the net short-term capital gain from
such sales or dispositions, over (ii) the net long-term capital
loss from such sales or dispositions for provisions which had
directed that the term "gross income" not include gain from the
sale or other disposition of stock or securities.
Subsec. (b)(4). Pub. L. 98-369, Sec. 52(b), added par. (4).
1981 - Subsec. (b). Pub. L. 97-34, Sec. 302(c)(4), (d)(1),
provided for general amendment of subsec. (b) so as to include
provisions relating to taxable interest described in section 128 of
this title, applicable to taxable years beginning after Dec. 31,
1984. Section 16(a) of Pub. L. 98-369, repealed section 302(c) of
Pub. L. 97-34, and provided that this title shall be applied and
administered as if section 302(c), and the amendments made by
section 302(c), had not been enacted.
1980 - Subsec. (b). Pub. L. 96-223, Sec. 404(b)(6), temporarily
substituted "Other dividends and taxable interest" for "Other
dividends" in heading, substituted "Deduction under section 243"
for "General rule" in heading for par. (1), struck out "the
exclusion under section 116 and" after "in computing" in text of
par. (1) following subpar. (B), added par. (2), redesignated former
pars. (2) and (3) as (3) and (4), respectively, and, in par. (4) as
so redesignated, substituted "116(b)(2)" for "116(b)" and
"116(c)(2)" for "116(c)" in subpar. (B) and added subpar. (C).
1964 - Subsec. (a). Pub. L. 88-272, Sec. 201(d)(8), struck out
"section 34(a) (relating to credit for dividends received by
individuals)," before "section 116" and the comma before "and".
Subsec. (b). Pub. L. 88-272, Secs. 201(d)(9), (10), 229(a)(4),
substituted "45 days" for "30 days" in par. (2), and struck out
"the credit under section 34(a)," before "the exclusion" in par.
(1), and "the credit under section 34," before "the exclusion" in
par. (2).
EFFECTIVE AND TERMINATION DATES OF 2003 AMENDMENT
Amendment by Pub. L. 108-27 applicable, except as otherwise
provided, to taxable years beginning after Dec. 31, 2002, see
section 302(f) of Pub. L. 108-27, set out as a note under section 1
of this title.
Amendment by Pub. L. 108-27 inapplicable to taxable years
beginning after Dec. 31, 2008, and the Internal Revenue Code of
1986 to be applied and administered to such years as if such
amendment had never been enacted, see section 303 of Pub. L.
108-27, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable to dividends received or
accrued after Dec. 31, 1987, in taxable years ending after such
date, see section 10221(e)(1) of Pub. L. 100-203, set out as a note
under section 243 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 612(b)(6) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 612(c) of
Pub. L. 99-514, set out as a note under section 301 of this title.
Amendment by section 655(a)(4) of Pub. L. 99-514 applicable to
taxable years beginning after Oct. 22, 1986, see section 655(b) of
Pub. L. 99-514, set out as a note under section 852 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 16(a) of Pub. L. 98-369 applicable to
taxable years ending after Dec. 31, 1983, see section 18(a) of Pub.
L. 98-369, set out as a note under section 48 of this title.
Section 52(d) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years of regulated investment companies beginning after the date of
t |
