I.R.C. § 851(a) General Rule —
For purposes of this subtitle, the term “regulated investment company”
means any domestic corporation—
I.R.C. § 851(a)(1) —
which, at all times during the taxable year—
I.R.C. § 851(a)(1)(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
I.R.C. § 851(a)(1)(B) —
has in effect an election under such Act to be treated as a business development
company, or
I.R.C. § 851(a)(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).
I.R.C. § 851(b) Limitations —
A corporation shall not be considered a regulated investment company for any taxable
year unless—
I.R.C. § 851(b)(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;
I.R.C. § 851(b)(2) —
at least 90 percent of its gross income is derived from—
I.R.C. § 851(b)(2)(A) —
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
I.R.C. § 851(b)(2)(B) —
net income derived from an interest in a qualified publicly traded partnership (as
defined in subsection
(h)); and
I.R.C. § 851(b)(3) —
at the close of each quarter of the taxable year—
I.R.C. § 851(b)(3)(A) —
at least 50 percent of the value of its total assets is represented by—
I.R.C. § 851(b)(3)(A)(i) —
cash and cash items (including receivables), Government securities and securities
of other regulated investment companies, and
I.R.C. § 851(b)(3)(A)(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
I.R.C. § 851(b)(3)(B) —
not more than 25 percent of the value of its total assets is invested in—
I.R.C. § 851(b)(3)(B)(i) —
the securities (other than Government securities or the securities of other regulated
investment companies)
of any one issuer,
I.R.C. § 851(b)(3)(B)(ii) —
the securities (other than the securities of other regulated investment companies)
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, or
I.R.C. § 851(b)(3)(B)(iii) —
the securities of one or more qualified publicly traded partnerships (as defined
in subsection (h)).
For purposes of paragraph (2), there shall be treated as dividends amounts included
in gross income under section 951(a)(1)(A) 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
(other than a qualified publicly traded partnership as defined in subsection (h))
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.
I.R.C. § 851(c) Rules Applicable To Subsection (b)(3) —
For purposes of subsection (b)(3) and this subsection—
I.R.C. § 851(c)(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.
I.R.C. § 851(c)(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.
I.R.C. § 851(c)(3) —
The term “controlled group” means one or more chains of corporations
connected through stock ownership with the taxpayer if—
I.R.C. § 851(c)(3)(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
I.R.C. § 851(c)(3)(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.
I.R.C. § 851(c)(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.
I.R.C. § 851(c)(5) —
The term “outstanding voting securities of such issuer” shall include
the equity securities of a qualified publicly traded partnership (as defined in subsection
(h)).
I.R.C. § 851(c)(6) —
All other terms shall have the same meaning as when used in the Investment Company Act of 1940, as amended.
I.R.C. § 851(d) Determination Of Status
I.R.C. § 851(d)(1) In General —
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.
I.R.C. § 851(d)(2) Special Rules Regarding Failure To Satisfy Requirements —
If paragraph (1) does not preserve a corporation's status as a regulated investment
company for any particular quarter—
I.R.C. § 851(d)(2)(A) In General —
A corporation that fails to meet the requirements of subsection (b)(3) (other than
a failure described in subparagraph
(B)(i) of this paragraph) for such quarter shall nevertheless be considered to have
satisfied the requirements of such subsection for such quarter if—
I.R.C. § 851(d)(2)(A)(i) —
following the corporation's identification of the failure to satisfy the requirements
of such subsection for such quarter, a description of each asset that causes the corporation
to fail to satisfy the requirements of such subsection at the close of such quarter
is set forth in a schedule for such quarter filed in the manner provided by the Secretary,
I.R.C. § 851(d)(2)(A)(ii) —
the failure to meet the requirements of such subsection for such quarter is due to
reasonable cause and not due to willful neglect, and
I.R.C. § 851(d)(2)(A)(iii)
I.R.C. § 851(d)(2)(A)(iii)(I) —
the corporation disposes of the assets set forth on the schedule specified in clause
(i) within 6 months after the last day of the quarter in which the corporation's identification
of the failure to satisfy the requirements of such subsection occurred or such other
time period prescribed by the Secretary and in the manner prescribed by the Secretary,
or
I.R.C. § 851(d)(2)(A)(iii)(II) —
the requirements of such subsection are otherwise met within the time period specified
in subclause (I).
I.R.C. § 851(d)(2)(B) Rule For Certain De Minimis Failures —
A corporation that fails to meet the requirements of subsection (b)(3) for such quarter
shall nevertheless be considered to have satisfied the requirements of such subsection
for such quarter if—
I.R.C. § 851(d)(2)(B)(i) —
such failure is due to the ownership of assets the total value of which does not exceed
the lesser of—
I.R.C. § 851(d)(2)(B)(i)(I) —
1 percent of the total value of the corporation's assets at the end of the quarter
for which such measurement is done, or
I.R.C. § 851(d)(2)(B)(i)(II) —
$10,000,000, and
I.R.C. § 851(d)(2)(B)(ii)
I.R.C. § 851(d)(2)(B)(ii)(I) —
the corporation, following the identification of such failure, disposes of assets
in order to meet the requirements of such subsection within 6 months after the last
day of the quarter in which the corporation's identification of the failure to satisfy
the requirements of such subsection occurred or such other time period prescribed
by the Secretary and in the manner prescribed by the Secretary, or
I.R.C. § 851(d)(2)(B)(ii)(II) —
the requirements of such subsection are otherwise met within the time period specified
in subclause (I).
I.R.C. § 851(d)(2)(C) Tax
I.R.C. § 851(d)(2)(C)(i) Tax Imposed —
If subparagraph (A) applies to a corporation for any quarter, there is hereby imposed
on such corporation a tax in an amount equal to the greater of—
I.R.C. § 851(d)(2)(C)(i)(I) —
$50,000, or
I.R.C. § 851(d)(2)(C)(i)(II) —
the amount determined (pursuant to regulations promulgated by the Secretary) by multiplying
the net income generated by the assets described in the schedule specified in subparagraph
(A)(i) for the period specified in clause (ii) by the highest rate of tax specified
in section 11.
I.R.C. § 851(d)(2)(C)(ii) Period —
For purposes of clause (i)(II), the period described in this clause is the period
beginning on the first date that the failure to satisfy the requirements of subsection
(b)(3) occurs as a result of the ownership of such assets and ending on the earlier
of the date on which the corporation disposes of such assets or the end of the first
quarter when there is no longer a failure to satisfy such subsection.
I.R.C. § 851(d)(2)(C)(iii) Administrative Provisions —
For purposes of subtitle F, a tax imposed by this subparagraph shall be treated as
an excise tax with respect to which the deficiency procedures of such subtitle apply.
I.R.C. § 851(e) Investment Companies Furnishing Capital To Development Corporations
I.R.C. § 851(e)(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.
I.R.C. § 851(e)(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.
I.R.C. § 851(e)(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.
I.R.C. § 851(e)(4) Definitions —
The terms used in this subsection shall have the same meaning as in subsections
(b)(3) and (c) of this section.
I.R.C. § 851(f) Certain Unit Investment Trusts —
For purposes of this title—
I.R.C. § 851(f)(1) —
A unit investment trust (as defined in the Investment Company Act of 1940)—
I.R.C. § 851(f)(1)(A) —
which is registered under such Act and issues periodic payment plan certificates
(as defined in such Act) in one or more series,
I.R.C. § 851(f)(1)(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
I.R.C. § 851(f)(1)(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.
I.R.C. § 851(f)(2) —
In the case of a unit investment trust described in paragraph (1)—
I.R.C. § 851(f)(2)(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;
I.R.C. § 851(f)(2)(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
I.R.C. § 851(f)(2)(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.
I.R.C. § 851(g) Special Rule For Series Funds
I.R.C. § 851(g)(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)).
I.R.C. § 851(g)(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.
I.R.C. § 851(h) Qualified Publicly Traded Partnership —
For purposes of this section, the term “qualified publicly traded partnership”
means a publicly traded partnership described in section 7704(b) other than a partnership which would satisfy the gross income requirements of
section 7704(c)(2) if qualifying income included only income described in subsection
(b)(2)(A).
I.R.C. § 851(i) Failure To Satisfy Gross Income Test
I.R.C. § 851(i)(1) Disclosure Requirement —
A corporation that fails to meet the requirement of paragraph
(2) of subsection (b) for any taxable year shall nevertheless be considered to have
satisfied the requirement of such paragraph for such taxable year if—
I.R.C. § 851(i)(1)(A) —
following the corporation's identification of the failure to meet such requirement
for such taxable year, a description of each item of its gross income described in
such paragraph is set forth in a schedule for such taxable year filed in the manner
provided by the Secretary, and
I.R.C. § 851(i)(1)(B) —
the failure to meet such requirement is due to reasonable cause and not due to willful
neglect.
I.R.C. § 851(i)(2) Imposition Of Tax On Failures —
If paragraph (1) applies to a regulated investment company for any taxable year, there
is hereby imposed on such company a tax in an amount equal to the excess of—
I.R.C. § 851(i)(2)(A) —
the gross income of such company which is not derived from sources referred to in
subsection (b)(2), over
I.R.C. § 851(i)(2)(B) —
1/9 of the gross income of such company which is derived from such sources.
(Aug. 16, 1954, ch. 736, 68A Stat. 268; Sept. 2, 1958,
Pub. L. 85-866, title I, 38, 72 Stat. 1638; Dec. 30, 1969, Pub. L. 91-172, title IX, 908(a), 83 Stat. 717; Mar. 29, 1975, Pub. L. 94-12, title VI, 602(a)(2), 89 Stat. 58; Oct. 4, 1976, Pub. L. 94-455, title XIX, 1901(a)(109), 1906(b)(13)(A), 90 Stat. 1783, 1834; Aug. 15, 1978, Pub. L. 95-345, 2(a)(3), 92 Stat. 481; Nov. 6, 1978, Pub. L. 95-600, title VII, 701(s)(1), 92 Stat. 2911; Jan. 6, 1983, Pub. L. 97-424, title V, 547(b)(1), 96 Stat. 2199; July 18, 1984, Pub. L. 98-369, div. A, title X, 1071(a)(1), 98 Stat. 1049; Oct. 22, 1986, Pub. L. 99-514, title VI, 652(a), (b), 653(a)-(c), 654(a), title XII, 1235(f)(3), 100 Stat. 2297, 2298, 2575; Nov. 10, 1988, Pub. L. 100-647, title I, 1006(m),
(n)(1), (2)(A), (B), (4), (5), (o), 102 Stat. 3415, 3416; Pub. L. 105-34, title XII, Sec. 1271, Aug. 5, 1997, 111 Stat 788; Pub. L. 108-357, title III, Sec. 331, Oct. 22, 2004, 118 Stat. 1418; Pub. L. 111-325, Sec. 201, Dec. 22, 2010, 124 Stat. 3537; Pub. L. 113-295, Div. A, title II, Sec. 205(e), Dec. 19, 2014, 128 Stat. 4010; Pub. L. 115-97, title I, Sec. 14212(b)(1)(B), 131 Stat. 2054, Dec. 22, 2017.)
BACKGROUND NOTES
Amendments to Subchapter
1988--Pub. L. 100-647, title I, 1018(u)(30), Nov. 10, 1988, 102 Stat. 3591, added item for part IV.
1978--Pub. L. 95-600, title III, 362(d)(8), Nov. 6, 1978, 92 Stat. 2852, added item for part III.
Amendments to Part
1980--Pub. L. 96-223, title IV, 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, 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.
AMENDMENTS
2017 -
Subsec. (b). Pub. L. 115-97, Sec. 14212(b)(1)(B), amended subsec. (b) by substituting “section 951(a)(1)(A)”
for “section 951(a)(1)(A)(i)” in the flush language at the end.
2014 - Subsec. (d)(2)(A). Pub. L. 113-295, Div. A, Sec. 205(e), amended subpar. (A) by inserting “of this paragraph”
after “subparagraph
(B)(i)”.
2010 - Subsec. (d). Pub. L. 111-325, Sec. 201(a), amended subsec. (d) by substituting “(1) In General.—A corporation which
meets” for “A corporation which meets”
and by adding par. (2).
Subsec. (i). Pub. L. 111-325, Sec. 201(b), added subsec. (i).
2004 - Subsec. (b). Pub. L. 108-357, Sec. 331(b), amended subsec. (b) by inserting “(other than a qualified publicly traded
partnership as defined in subsection (h))” after “derived from a partnership”
in the last sentence.
Subsec. (b)(2). Pub. L. 108-357, Sec. 331(a), amended par. (2). Prior to amendment, it read as follows:
“(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”.
Subsec. (b)(3)(B). Pub. L. 108-357, Sec. 331(f), amended subpar. (B). Prior to amendment it read as follows:
“(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.”
Subsec. (c)(5)-(6). Pub. L. 108-357, Sec. 331(c), redesignated par. (5) as par. (6) and added par. (6).
Subsec. (h). Pub. L. 108-357, Sec. 331(d), adding subsec. (h).
1997--Subsec. (b). Pub. L. 105-34, Sec. 1271(b), 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), (3), (4). Pub. L. 105-34, Sec. 1271(a), struck paragraph (3), added “and” at the end of paragraph (2), and redesignated
paragraph (4) as paragraph (3). Prior to being stricken paragraph (3) read as follows:
“(3) 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. (b)(3). Pub. L. 105-34, Sec. 1271(b)(1),
substituted “paragraph (2)” for “paragraphs (2) and (3)”.
and struck out the last sentence of paragraph (3).
Subsec. (c). Pub. L. 105-34, Sec. 1271(b)(2), amended by striking “subsection (b)(4)” and inserting “subsection
(b)(3)” each place it appeared.
Subsec. (d). Pub. L. 105-34, Sec. 1271(b)(3), amended by striking “subsections (b)(4)” and inserting “subsections
(b)(3)”.
Subsec. (e)(1). Pub. L. 105-34, Sec. 1271(b)(4), amended by striking “subsection (b)(4)” and inserting “subsection
(b)(3)”.
Subsec. (e)(4). Pub. L. 105-34, Sec. 1271(b)(5), amended by striking “subsections (b)(4)” and inserting “subsections
(b)(3)”.
Subsec. (g), (h). Pub. L. 105-34, Sec. 1271(b)(6), struck subsection (g) and redesignated subsection (h) as subsection
(g). Prior to being stricken subsec. (g) read as follows:
“(g) Treatment of certain hedging transactions
“(1) In general
“In the case of any designated hedge, for purposes of subsection (b)(3), increases
(and decreases)
during the period of the hedge in the value of positions which are part of such hedge
shall be netted.
“(2) Designated hedge
“For purposes of this subsection, there is a designated hedge where--
“(A) the taxpayer's risk of loss with respect to any position in property is
reduced by reason of--
“(i) the taxpayer having an option to sell, being under a contractual obligation
to sell, or having made (and not closed) a short sale of substantially identical property,
“(ii) the taxpayer being the grantor of an option to buy substantially identical
property, or
“(iii) under regulations prescribed by the Secretary, the taxpayer holding 1
or more other positions, and
“(B) the positions which are part of the hedge are clearly identified by the
taxpayer in the manner prescribed by regulations.”
Subsec. (g). Pub. L. 105-34, Sec. 1271(b)(7), struck paragraph (3) of subsection (g) (as redesignated by Pub. L. 105-34, Sec. 1271(b)(6)). Prior to being stricken it read as follows:
“(3) Special rule for abnormal redemptions
“(A) In general
“Any fund treated as a separate corporation under paragraph (1) shall not be
disqualified under subsection
(b)(3) for any taxable year by reason of sales resulting from abnormal redemptions
on any day and occurring before the close of the 5th business day after such day if--
“(i) the sum of the percentages determined under subparagraph (B) for the abnormal
redemptions on such day and for abnormal redemptions on prior days during such taxable
year exceeds 30 percent; and
“(ii) the regulated investment company of which such fund is a part would meet
the requirements of subsection (b)(3) for such taxable year if all the funds which
are part of such company were treated as a single company.
“(B) Abnormal redemptions
“For purposes of subparagraph
(A), the term “abnormal redemptions” means redemptions occurring on any
day if the net redemptions on such day exceed 1 percent of the fund's net asset value.
“(C) Determination of net asset value
“For purposes of this paragraph, net asset value for any day shall be determined
as of the close of the preceding day.
“(D) Limitation
“For purposes of subparagraph
(A), any sale or other disposition of stock or securities held less than 3 months
occurring during any day shall be deemed to result from abnormal redemptions until
the cumulative proceeds from such sales or dispositions occurring during such day,
plus the cumulative net positive cash flow of the fund for preceding business days
(if any)
following the day with abnormal redemptions, exceed the amount of net redemptions
on the day with abnormal redemptions.”
1988--Subsec. (a)(1). Pub. L. 100-647, 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, 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, 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, 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, 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, 1006(n)(4), substituted “contractual obligation” for “contractual
option”.
Subsec. (h). Pub. L. 100-647, 1006(o)(1), redesignated subsec. (q)
as (h).
Subsec. (h)(3). Pub. L. 100-647, 1006(o)(2), added par. (3).
Subsec. (q). Pub. L. 100-647, 1006(o)(1), redesignated subsec. (q)
as (h).
1986--Subsec. (a)(1). Pub. L. 99-514, 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, 1235(f)(3), inserted “or 1293(a)” and
“or 1293(c) (as the case may be)”, in concluding provision.
Pub. L. 99-514, 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, 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, 652(b), substituted “registered management company or registered business
development company” for “registered management company”.
Subsec. (g). Pub. L. 99-514, 653(a), added subsec. (g).
Subsec. (q). Pub. L. 99-514, 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, 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, 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, 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, 38(a), substituted
“not earlier than 60 days” for “not less than 60 days” in
first sentence.
Subsec. (e)(2). Pub. L. 85-866, 38(b), substituted “issuer” for “issues”.
EFFECTIVE DATE OF 2017 AMENDMENT
Amendment by Pub. L. 115-97, Sec. 14212(b)(1)(B), effective for taxable years of foreign corporations beginning
after December 31, 2017, and to taxable years of U.S. shareholders in which or with
which such taxable years of foreign corporations end.
EFFECTIVE DATE OF 2014 AMENDMENT
Amendment by Pub. L. 113-295, Div. A, Sec 205(e), effective as if included in the provision of the Regulated Investment
Company Modernization Act of 2010 [Pub. L. 111-325, Sec. 201] to which it relates [Effective for taxable years with respect to which the due date
(determined with regard to any extensions) of the return of tax for such taxable year
is after Dec. 22, 2010].
Section 205(f)(2) of Pub. L. 113-295, Div. A, provided the following savings provision:
“(2) SAVINGS PROVISION
“In the case of an election by a regulated investment company under section
852(b)(8) of the Internal Revenue Code of 1986 with respect to any taxable year beginning before the date of the enactment
of this Act, such company may treat the amendments made by paragraphs (1) and (2)
of subsection (c) as not applying with respect to any such election.”
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendments by Sec. 201 of Pub. L. 111-325 effective for taxable years with respect to which the due date (determined with regard
to any extensions) of the return of tax for such taxable year is after the date of
the enactment of this Act [Enacted: Dec. 22, 2010].
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by Sec. 331 of Pub. L. 108-357 effective for taxable years beginning after the date of the enactment of this Act
[Enacted: Oct. 22, 2004].
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1271(c) of Pub. L. 105-34 provided that: “The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act [enacted: Aug. 5, 1997].”
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.
