Home > Data > Subtitle D > Chapter 44 > Sec. 4982
Sec. 4982. Excise Tax On Undistributed Income Of Regulated Investment Companies
Last Updated: January 8, 2012
(a) Imposition of tax
There is hereby imposed a tax on every regulated investment
company for each calendar year equal to 4 percent of the excess (if
any) of -
(1) the required distribution for such calendar year, over
(2) the distributed amount for such calendar year.
(b) Required distribution
For purposes of this section -
(1) In general
The term "required distribution" means, with respect to any
calendar year, the sum of -
(A) 98 percent of the regulated investment company's ordinary
income for such calendar year, plus
(B) 98.2 percent of the regulated investment company's
capital gain net income for the 1-year period ending on October
31 of such calendar year.
(2) Increase by prior year shortfall
The amount determined under paragraph (1) for any calendar year
shall be increased by the excess (if any) of -
(A) the grossed up required distribution for the preceding
calendar year, over
(B) the distributed amount for such preceding calendar year.
(3) Grossed up required distribution
The grossed up required distribution for any calendar year is
the required distribution for such year determined -
(A) with the application of paragraph (2) to such taxable
year, and
(B) by substituting "100 percent" for each percentage set
forth in paragraph (1).
(c) Distributed amount
For purposes of this section -
(1) In general
The term "distributed amount" means, with respect to any
calendar year, the sum of -
(A) the deduction for dividends paid (as defined in section
561) during such calendar year, and
(B) any amount on which tax is imposed under subsection
(b)(1) or (b)(3)(A) of section 852 for any taxable year ending
in such calendar year.
(2) Increase by prior year overdistribution
The amount determined under paragraph (1) for any calendar year
shall be increased by the excess (if any) of -
(A) the distributed amount for the preceding calendar year
(determined with the application of this paragraph to such
preceding calendar year), over
(B) the grossed up required distribution for such preceding
calendar year.
(3) Determination of dividends paid
The amount of the dividends paid during any calendar year shall
be determined without regard to -
(A) the provisions of section 855, and
(B) any exempt-interest dividend as defined in section
852(b)(5).
(4) Special rule for estimated tax payments
(A) In general
In the case of a regulated investment company which elects
the application of this paragraph for any calendar year -
(i) the distributed amount with respect to such company for
such calendar year shall be increased by the amount on which
qualified estimated tax payments are made by such company
during such calendar year, and
(ii) the distributed amount with respect to such company
for the following calendar year shall be reduced by the
amount of such increase.
(B) Qualified estimated tax payments
For purposes of this paragraph, the term "qualified estimated
tax payments" means, with respect to any calendar year,
payments of estimated tax of a tax described in paragraph
(1)(B) for any taxable year which begins (but does not end) in
such calendar year.
(d) Time for payment of tax
The tax imposed by this section for any calendar year shall be
paid on or before March 15 of the following calendar year.
(e) Definitions and special rules
For purposes of this section -
(1) Ordinary income
The term "ordinary income" means the investment company taxable
income (as defined in section 852(b)(2)) determined -
(A) without regard to subparagraphs (A) and (D) of section
852(b)(2),
(B) by not taking into account any gain or loss from the sale
or exchange of a capital asset, and
(C) by treating the calendar year as the company's taxable
year.
(2) Capital gain net income
(A) In general
Except as provided in subparagraph (B), the term "capital
gain net income" has the meaning given such term by section
1222(9) (determined by treating the 1-year period ending on
October 31 of any calendar year as the company's taxable year).
(B) Reduction by net ordinary loss for calendar year
The amount determined under subparagraph (A) shall be reduced
(but not below the net capital gain) by the amount of the
company's net ordinary loss for the calendar year.
(C) Definitions
For purposes of this paragraph -
(i) Net capital gain
The term "net capital gain" has the meaning given such term
by section 1222(11) (determined by treating the 1-year period
ending on October 31 of the calendar year as the company's
taxable year).
(ii) Net ordinary loss
The net ordinary loss for the calendar year is the amount
which would be the net operating loss of the company for the
calendar year if the amount of such loss were determined in
the same manner as ordinary income is determined under
paragraph (1).
(3) Treatment of deficiency distributions
In the case of any deficiency dividend (as defined in section
860(f)) -
(A) such dividend shall be taken into account when paid
without regard to section 860, and
(B) any income giving rise to the adjustment shall be treated
as arising when the dividend is paid.
(4) Election to use taxable year in certain cases
(A) In general
If -
(i) the taxable year of the regulated investment company
ends with the month of November or December, and
(ii) such company makes an election under this paragraph,
subsection (b)(1)(B) and paragraph (2) of this subsection shall
be applied by taking into account the company's taxable year in
lieu of the 1-year period ending on October 31 of the calendar
year.
(B) Election revocable only with consent
An election under this paragraph, once made, may be revoked
only with the consent of the Secretary.
(5) Treatment of specified gains and losses after October 31 of
calendar year
(A) In general
Any specified gain or specified loss which (but for this
paragraph) would be properly taken into account for the portion
of the calendar year after October 31 shall be treated as
arising on January 1 of the following calendar year.
(B) Specified gains and losses
For purposes of this paragraph -
(i) Specified gain
The term "specified gain" means ordinary gain from the
sale, exchange, or other disposition of property (including
the termination of a position with respect to such property).
Such term shall include any foreign currency gain
attributable to a section 988 transaction (within the meaning
of section 988) and any amount includible in gross income
under section 1296(a)(1).
(ii) Specified loss
The term "specified loss" means ordinary loss from the
sale, exchange, or other disposition of property (including
the termination of a position with respect to such property).
Such term shall include any foreign currency loss
attributable to a section 988 transaction (within the meaning
of section 988) and any amount allowable as a deduction under
section 1296(a)(2).
(C) Special rule for companies electing to use the taxable year
In the case of any company making an election under paragraph
(4), subparagraph (A) shall be applied by substituting the last
day of the company's taxable year for October 31.
(6) Treatment of mark to market gain
(A) In general
For purposes of determining a regulated investment company's
ordinary income, notwithstanding paragraph (1)(C), each
specified mark to market provision shall be applied as if such
company's taxable year ended on October 31. In the case of a
company making an election under paragraph (4), the preceding
sentence shall be applied by substituting the last day of the
company's taxable year for October 31.
(B) Specified mark to market provision
For purposes of this paragraph, the term "specified mark to
market provision" means sections 1256 and 1296 and any other
provision of this title (or regulations thereunder) which
treats property as disposed of on the last day of the taxable
year.
(7) Elective deferral of certain ordinary losses
Except as provided in regulations prescribed by the Secretary,
in the case of a regulated investment company which has a taxable
year other than the calendar year -
(A) such company may elect to determine its ordinary income
for the calendar year without regard to any net ordinary loss
(determined without regard to specified gains and losses taken
into account under paragraph (5)) which is attributable to the
portion of such calendar year which is after the beginning of
the taxable year which begins in such calendar year, and
(B) any amount of net ordinary loss not taken into account
for a calendar year by reason of subparagraph (A) shall be
treated as arising on the 1st day of the following calendar
year.
(f) Exception for certain regulated investment companies
This section shall not apply to any regulated investment company
for any calendar year if at all times during such calendar year
each shareholder in such company was -
(1) a trust described in section 401(a) and exempt from tax
under section 501(a),
(2) a segregated asset account of a life insurance company held
in connection with variable contracts (as defined in section
817(d)) (!1)
(3) any other tax-exempt entity whose ownership of beneficial
interests in the company would not preclude the application of
section 817(h)(4), or
(4) another regulated investment company described in this
subsection.
For purposes of the preceding sentence, any shares attributable to
an investment in the regulated investment company (not exceeding
$250,000) made in connection with the organization of such company
shall not be taken into account.
-SOURCE
(Added Pub. L. 99-514, title VI, Sec. 651(a), Oct. 22, 1986, 100
Stat. 2294; amended Pub. L. 100-203, title X, Sec. 10104(b)(1),
Dec. 22, 1987, 101 Stat. 1330-387; Pub. L. 100-647, title I, Sec.
1006(l)(2), (5), (6), Nov. 10, 1988, 102 Stat. 3413, 3414; Pub. L.
101-239, title VII, Sec. 7204(a)(1), Dec. 19, 1989, 103 Stat. 2334;
Pub. L. 105-34, title XI, Sec. 1122(c)(1), Aug. 5, 1997, 111 Stat.
976; Pub. L. 111-325, title IV, Secs. 401(a), 402(a), 403(a),
404(a), Dec. 22, 2010, 124 Stat. 3552-3554.)
-MISC1
AMENDMENTS
2010 - Subsec. (b)(1)(B). Pub. L. 111-325, Sec. 404(a),
substituted "98.2 percent" for "98 percent".
Subsec. (c)(4). Pub. L. 111-325, Sec. 403(a), added par. (4).
Subsec. (e)(5) to (7). Pub. L. 111-325, Sec. 402(a), added pars.
(5) to (7) and struck out former pars. (5) and (6) which related to
treatment of foreign currency gains and losses after October 31 of
calendar year and treatment of gain recognized under section 1296,
respectively.
Subsec. (f). Pub. L. 111-325, Sec. 401(a)(1), struck out "either"
before dash at end of introductory provisions.
Subsec. (f)(3), (4). Pub. L. 111-325, Sec. 401(a)(2)-(4), added
pars. (3) and (4).
1997 - Subsec. (e)(6). Pub. L. 105-34 added par. (6).
1989 - Subsec. (b)(1)(A). Pub. L. 101-239 substituted "98
percent" for "97 percent".
1988 - Subsec. (e)(2). Pub. L. 100-647, Sec. 1006(l)(2), amended
par. (2) generally. Prior to amendment, par. (2) read as follows:
"The term 'capital gain net income' has the meaning given to such
term by section 1222(9) (determined by treating the 1-year period
ending on October 31 of any calendar year as the company's taxable
year)."
Subsec. (e)(5). Pub. L. 100-647, Sec. 1006(l)(5), added par. (5).
Subsec. (f). Pub. L. 100-647, Sec. 1006(l)(6), added subsec. (f).
1987 - Subsec. (b)(1)(B). Pub. L. 100-203 substituted "98
percent" for "90 percent".
EFFECTIVE DATE OF 2010 AMENDMENT
Pub. L. 111-325, title IV, Sec. 401(b), Dec. 22, 2010, 124 Stat.
3552, provided that: "The amendment made by this section [amending
this section] shall apply to calendar years beginning after the
date of the enactment of this Act [Dec. 22, 2010]."
Pub. L. 111-325, title IV, Sec. 402(b), Dec. 22, 2010, 124 Stat.
3553, provided that: "The amendments made by this section [amending
this section] shall apply to calendar years beginning after the
date of the enactment of this Act [Dec. 22, 2010]."
Pub. L. 111-325, title IV, Sec. 403(b), Dec. 22, 2010, 124 Stat.
3554, provided that: "The amendment made by this section [amending
this section] shall apply to calendar years beginning after the
date of the enactment of this Act [Dec. 22, 2010]."
Pub. L. 111-325, title IV, Sec. 404(b), Dec. 22, 2010, 124 Stat.
3554, provided that: "The amendments made by this section [amending
this section] shall apply to calendar years beginning after the
date of the enactment of this Act [Dec. 22, 2010]."
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by 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.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7204(a)(2) of Pub. L. 101-239 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to calendar years ending after July 10, 1989."
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
Section 10104(b)(2) of Pub. L. 100-203 provided that: "The
amendment made by paragraph (1) [amending this section] shall take
effect as if included in the amendments made by section 651 of the
Tax Reform Act of 1986 [section 651 of Pub. L. 99-514, see
Effective Date note below]."
EFFECTIVE DATE
Section 651(d) of Pub. L. 99-514 provided that: "The amendments
made by this section [enacting this section and amending sections
852 and 855 of this title] shall apply to calendar years beginning
after December 31, 1986."