RIC Tax Measures Enacted

Two significant tax acts affecting the federal tax treatment of regulated investment companies (RICs) have been signed into law in the past week.

First, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, signed into law on December 17, 2010, to extend the “Bush tax cuts” for two years, contained three extender provisions that relate specifically to foreign investors in RICs. These consist of two-year extensions of the withholding tax exemptions for RIC dividends attributable to portfolio interest income from U.S. sources and for RIC dividends attributable to short-term capital gains, which will now apply for RIC taxable years beginning before January 1, 2012, and a two-year extension of the look-through rule that provides generally that RIC shares will be included in the gross taxable estate of a foreign decedent only to the extent of the RIC’s investment in U.S. assets, which will now apply for individuals who die before January 1, 2012.

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