REGULATED INVESTMENT COMPANIES ALLOWED TO PASS-THRU TAX CREDIT BOND CREDITS.

SEC. 1541. REGULATED INVESTMENT COMPANIES ALLOWED TO PASS-THRU TAX CREDIT BOND CREDITS.(a) In General.—Part I of subchapter M of chapter 1 is amended by inserting after section 853 the following new section:“SEC. 853A. CREDITS FROM TAX CREDIT BONDS ALLOWED TO SHAREHOLDERS.“(a) General Rule.—A regulated investment company—“(1) which holds (directly or indirectly) one or more tax credit bonds on one or more applicable dates during the taxable year, and123 STAT. 361“(2) which meets the requirements of section 852(a) for the taxable year,may elect the application of this section with respect to credits allowable to the investment company during such taxable year with respect to such bonds.“(b) Effect of Election.—If the election provided in subsection (a) is in effect for any taxable year—“(1) the regulated investment company shall not be allowed any credits to which subsection (a) applies for such taxable year,“(2) the regulated investment company shall—“(A) include in gross income (as interest) for such taxable year an amount equal to the amount that such investment company would have included in gross income with respect to such credits if this section did not apply, and“(B) increase the amount of the dividends paid deduction for such taxable year by the amount of such income, and“(3) each shareholder of such investment company shall—“(A) include in gross income an amount equal to such shareholder’s proportionate share of the interest income attributable to such credits, and“(B) be allowed the shareholder’s proportionate share of such credits against the tax imposed by this chapter.“(c) Notice to Shareholders.—For purposes of subsection (b)(3), the shareholder’s proportionate share of—“(1) credits described in subsection (a), and“(2) gross income in respect of such credits,shall not exceed the amounts so designated by the regulated investment 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.“(e) Definitions and Special Rules.—“(1) Definitions.—For purposes of this subsection—“(A) Tax credit bond.—The term ‘tax credit bond’ means—“(i) a qualified tax credit bond (as defined in section 54A(d)),“(ii) a build America bond (as defined in section 54AA(d)), and“(iii) any bond for which a credit is allowable under subpart H of part IV of subchapter A of this chapter.“(B) Applicable date.—The term ‘applicable date’ means—“(i) in the case of a qualified tax credit bond or a bond described in subparagraph (A)(iii), any credit allowance date (as defined in section 54A(e)(1)), and“(ii) in the case of a build America bond (as defined in section 54AA(d)), any interest payment date (as defined in section 54AA(e)).“(2) Stripped tax credit bonds.—If the ownership of a tax credit bond is separated from the credit with respect to such bond, subsection (a) shall be applied by reference to the 123 STAT. 362 instruments evidencing the entitlement to the credit rather than the tax credit bond.“(f) Regulations, etc.—The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including methods for determining a shareholder’s proportionate share of credits.” .(b) Conforming Amendments.—(1) Section 54(l) is amended by striking paragraph (4) and by redesignating paragraphs (5) and (6) as paragraphs (4) and (5), respectively.(2) Section 54A(h) is amended to read as follows:“(h) Bonds Held by Real Estate Investment Trusts.—If any qualified tax credit bond is held by a real estate investment trust, the credit determined under subsection (a) shall be allowed to beneficiaries of such trust (and any gross income included under subsection (f) with respect to such credit shall be distributed to such beneficiaries) under procedures prescribed by the Secretary.”.(3) The table of sections for part I of subchapter M of chapter 1 is amended by inserting after the item relating to section 853 the following new item: “Sec. 853A. Credits from tax credit bonds allowed to shareholders.”. (c) Effective Date.—The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.