§ 4982. — Excise tax on undistributed income of regulated investment companies.
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 26USC4982]
TITLE 26--INTERNAL REVENUE CODE
Subtitle D--Miscellaneous Excise Taxes
CHAPTER 44--QUALIFIED INVESTMENT ENTITIES
Sec. 4982. Excise tax on undistributed income of regulated
investment companies
(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 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).
(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 foreign currency gains and losses after
October 31 of calendar year
Any foreign currency gain or loss which is attributable to a
section 988 transaction and which is properly taken into account for
the portion of the calendar year after October 31 shall not be taken
into account in determining the amount of the ordinary income of the
regulated investment company for such calendar year but shall be
taken into account in determining the ordinary income of the
investment company for the following calendar year. In the case of
any 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.
(6) Treatment of gain recognized under section 1296
For purposes of determining a regulated investment company's
ordinary income--
(A) notwithstanding paragraph (1)(C), section 1296 shall be
applied as if such company's taxable year ended on October 31,
and
(B) any ordinary gain or loss from an actual disposition of
stock in a passive foreign investment company during the portion
of the calendar year after October 31 shall be taken into
account in determining such regulated investment company's
ordinary income for the following calendar year.
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.
(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 either--
(1) a trust described in section 401(a) and exempt from tax
under section 501(a), or
(2) a segregated asset account of a life insurance company held
in connection with variable contracts (as defined in section
817(d)).
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.
(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.)
Amendments
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 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.''
Section Referred to in Other Sections
This section is referred to in section 852 of this title.
