TREATMENT OF REGULATED INVESTMENT COMPANIES UNDER 2-PERCENT FLOOR.

SEC. 10104. TREATMENT OF REGULATED INVESTMENT COMPANIES UNDER 2-PERCENT FLOOR. (a) 1-Year Delay in Treatment of Publicly Offered Regulated Investment Companies Under 2-Percent Floor.— (1) General rule.— Section 67(c) of the Internal Revenue Code of 1986 to the extent it relates to indirect deductions through a publicly offered regulated investment company shall apply only to taxable years beginning after December 31, 1987. (2) Publicly offered regulated investment company defined.— For purposes of this subsection— (A) In general.— The term “publicly offered regulated investment company” means a regulated investment company the shares of which are— 101 STAT. 1330–387 (i) continuously offered pursuant to a public offering (within the meaning of section 4 of the Securities Act of 1933, as amended (15 U.S.C. 77a to 77aa)), (ii) regularly traded on an established securities market, or (iii) held by or for no fewer than 500 persons at all times during the taxable year. (B) Secretary may reduce 500 person requirement.— The Secretary of the Treasury or his delegate may by regulation decrease the minimum shareholder requirement of subparagraph (A)(iii) in the case of regulated investment companies which experience a loss of shareholders through net redemptions of their shares, (b) Changes in Distribution Requirements.— (1) Increase in required distribution of income.— Paragraph (1) of section 4982(b) (defining required distribution) is amended by striking out “90 percent in subparagraph (B)” and inserting in lieu thereof “98 percent”. (2) Effective date.— The amendment made by paragraph (1) shall take effect as if included in the amendments made by section 651 of the Tax Reform Act of 1986.