MODIFICATION OF DIVIDEND DESIGNATION REQUIREMENTS AND ALLOCATION RULES FOR REGULATED INVESTMENT COMPANIES.

SEC. 301. MODIFICATION OF DIVIDEND DESIGNATION REQUIREMENTS AND ALLOCATION RULES FOR REGULATED INVESTMENT COMPANIES.(a) Capital Gain Dividends.—(1) In general.—Subparagraph (C) of section 852(b)(3) is amended to read as follows:“(C) Definition of capital gain dividend.—For purposes of this part—“(i) In general.—Except as provided in clause (ii), a capital gain dividend is any dividend, or part thereof, which is reported by the company as a capital gain dividend in written statements furnished to its shareholders.“(ii) Excess reported amounts.—If the aggregate reported amount with respect to the company for any taxable year exceeds the net capital gain of the company for such taxable year, a capital gain dividend is the excess of—“(I) the reported capital gain dividend amount, over“(II) the excess reported amount which is allocable to such reported capital gain dividend amount.“(iii) Allocation of excess reported amount.—“(I) In general.—Except as provided in subclause (II), the excess reported amount (if any) which is allocable to the reported capital gain dividend amount is that portion of the excess reported amount which bears the same ratio to the excess 124 STAT. 3542 reported amount as the reported capital gain dividend amount bears to the aggregate reported amount.“(II) Special rule for noncalendar year taxpayers.—In the case of any taxable year which does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for such taxable year, subclause (I) shall be applied by substituting ‘post-December reported amount’ for ‘aggregate reported amount’ and no excess reported amount shall be allocated to any dividend paid on or before December 31 of such taxable year.“(iv) Definitions.—For purposes of this subparagraph—“(I) Reported capital gain dividend amount.—The term ‘reported capital gain dividend amount’ means the amount reported to its shareholders under clause (i) as a capital gain dividend.“(II) Excess reported amount.—The term ‘excess reported amount’ means the excess of the aggregate reported amount over the net capital gain of the company for the taxable year.“(III) Aggregate reported amount.—The term ‘aggregate reported amount’ means the aggregate amount of dividends reported by the company under clause (i) as capital gain dividends for the taxable year (including capital gain dividends paid after the close of the taxable year described in section 855).“(IV) Post-december reported amount.—The term ‘post-December reported amount’ means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year.“(v) Adjustment for determinations.—If there is an increase in the excess described in subparagraph (A) for the taxable year which results from a determination (as defined in section 860(e)), the company may, subject to the limitations of this subparagraph, increase the amount of capital gain dividends reported under clause (i).“(vi) Special rule for losses late in the calendar year.—For special rule for certain losses after October 31, see paragraph (8).”.(2) Conforming amendment.—Subparagraph (B) of section 860(f)(2) is amended by inserting “or reported (as the case may be)” after “designated”.(b) Exempt-Interest Dividends.—Subparagraph (A) of section 852(b)(5) is amended to read as follows:“(A) Definition of exempt-interest dividend.—“(i) In general.—Except as provided in clause (ii), an exempt-interest dividend is any dividend or part thereof (other than a capital gain dividend) paid by a regulated investment company and reported by the company as an exempt-interest dividend in written statements furnished to its shareholders.124 STAT. 3543“(ii) Excess reported amounts.—If the aggregate reported amount with respect to the company for any taxable year exceeds the exempt interest of the company for such taxable year, an exempt-interest dividend is the excess of—“(I) the reported exempt-interest dividend amount, over“(II) the excess reported amount which is allocable to such reported exempt-interest dividend amount.“(iii) Allocation of excess reported amount.—“(I) In general.—Except as provided in subclause (II), the excess reported amount (if any) which is allocable to the reported exempt-interest dividend amount is that portion of the excess reported amount which bears the same ratio to the excess reported amount as the reported exempt-interest dividend amount bears to the aggregate reported amount.“(II) Special rule for noncalendar year taxpayers.—In the case of any taxable year which does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for such taxable year, subclause (I) shall be applied by substituting ‘post-December reported amount’ for ‘aggregate reported amount’ and no excess reported amount shall be allocated to any dividend paid on or before December 31 of such taxable year.“(iv) Definitions.—For purposes of this subparagraph—“(I) Reported exempt-interest dividend amount.—The term ‘reported exempt-interest dividend amount’ means the amount reported to its shareholders under clause (i) as an exempt-interest dividend.“(II) Excess reported amount.—The term ‘excess reported amount’ means the excess of the aggregate reported amount over the exempt interest of the company for the taxable year.“(III) Aggregate reported amount.—The term ‘aggregate reported amount’ means the aggregate amount of dividends reported by the company under clause (i) as exempt-interest dividends for the taxable year (including exempt-interest dividends paid after the close of the taxable year described in section 855).“(IV) Post-december reported amount.—The term ‘post-December reported amount’ means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year.“(V) Exempt interest.—The term ‘exempt interest’ means, with respect to any regulated investment company, the excess of the amount of interest excludable from gross income under 124 STAT. 3544 section 103(a) over the amounts disallowed as deductions under sections 265 and 171(a)(2).”.(c) Foreign Tax Credits.—(1) In general.—Subsection (c) of section 853 is amended—(A) by striking “so designated by the company in a written notice mailed to its shareholders not later than 60 days after the close of the taxable year” and inserting “so reported by the company in a written statement furnished to such shareholder”, and(B) by striking “Notice” in the heading and inserting “Statements”.(2) Conforming amendments.—Subsection (d) of section 853 is amended—(A) by striking “and the notice to shareholders required by subsection (c)” in the text thereof, and(B) by striking “and Notifying Shareholders” in the heading thereof.(d) Credits for Tax Credit Bonds.—(1) In general.—Subsection (c) of section 853A is amended—(A) by striking “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” and inserting “so reported by the regulated investment company in a written statement furnished to such shareholder”, and(B) by striking “Notice” in the heading and inserting “Statements”.(2) Conforming amendments.—Subsection (d) of section 853A is amended—(A) by striking “and the notice to shareholders required by subsection (c)” in the text thereof, and(B) by striking “and Notifying Shareholders” in the heading thereof.(e) Dividend Received Deduction, etc.—(1) In general.—Paragraph (1) of section 854(b) is amended—(A) by striking “designated under this subparagraph by the regulated investment company” in subparagraph (A) and inserting “reported by the regulated investment company as eligible for such deduction in written statements furnished to its shareholders”,(B) by striking “designated by the regulated investment company” in subparagraph (B)(i) and inserting “reported by the regulated investment company as qualified dividend income in written statements furnished to its shareholders”,(C) by striking “designated” in subparagraph (C)(i) and inserting “reported”, and(D) by striking “designated” in subparagraph (C)(ii) and inserting “reported”.(2) Conforming amendments.—Subsection (b) of section 854 is amended by striking paragraph (2) and by redesignating paragraphs (3), (4), and (5), as paragraphs (2), (3), and (4), respectively.(f) Dividends Paid to Certain Foreign Persons.—124 STAT. 3545(1) Interest-related dividends.—Subparagraph (C) of section 871(k)(1) is amended by striking all that precedes “any taxable year of the company beginning” and inserting the following:“(C) Interest-related dividend.—For purposes of this paragraph—“(i) In general.—Except as provided in clause (ii), an interest related dividend is any dividend, or part thereof, which is reported by the company as an interest related dividend in written statements furnished to its shareholders.“(ii) Excess reported amounts.—If the aggregate reported amount with respect to the company for any taxable year exceeds the qualified net interest income of the company for such taxable year, an interest related dividend is the excess of—“(I) the reported interest related dividend amount, over“(II) the excess reported amount which is allocable to such reported interest related dividend amount.“(iii) Allocation of excess reported amount.—“(I) In general.—Except as provided in subclause (II), the excess reported amount (if any) which is allocable to the reported interest related dividend amount is that portion of the excess reported amount which bears the same ratio to the excess reported amount as the reported interest related dividend amount bears to the aggregate reported amount.“(II) Special rule for noncalendar year taxpayers.—In the case of any taxable year which does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for such taxable year, subclause (I) shall be applied by substituting ‘post-December reported amount’ for ‘aggregate reported amount’ and no excess reported amount shall be allocated to any dividend paid on or before December 31 of such taxable year.“(iv) Definitions.—For purposes of this subparagraph—“(I) Reported interest related dividend amount.—The term ‘reported interest related dividend amount’ means the amount reported to its shareholders under clause (i) as an interest related dividend.“(II) Excess reported amount.—The term ‘excess reported amount’ means the excess of the aggregate reported amount over the qualified net interest income of the company for the taxable year.“(III) Aggregate reported amount.—The term ‘aggregate reported amount’ means the aggregate amount of dividends reported by the company under clause (i) as interest related dividends for 124 STAT. 3546 the taxable year (including interest related dividends paid after the close of the taxable year described in section 855).“(IV) Post-december reported amount.—The term ‘post-December reported amount’ means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year.“(v) Termination.—The term ‘interest related dividend’ shall not include any dividend with respect to”.(2) Short-term capital gain dividends.—Subparagraph (C) of section 871(k)(2) is amended by striking all that precedes “any taxable year of the company beginning” and inserting the following:“(C) Short-term capital gain dividend.—For purposes of this paragraph—“(i) In general.—Except as provided in clause (ii), the term ‘short-term capital gain dividend’ means any dividend, or part thereof, which is reported by the company as a short-term capital gain dividend in written statements furnished to its shareholders.“(ii) Excess reported amounts.—If the aggregate reported amount with respect to the company for any taxable year exceeds the qualified short-term gain of the company for such taxable year, the term ‘short-term capital gain dividend’ means the excess of—“(I) the reported short-term capital gain dividend amount, over“(II) the excess reported amount which is allocable to such reported short-term capital gain dividend amount.“(iii) Allocation of excess reported amount.—“(I) In general.—Except as provided in subclause (II), the excess reported amount (if any) which is allocable to the reported short-term capital gain dividend amount is that portion of the excess reported amount which bears the same ratio to the excess reported amount as the reported short-term capital gain dividend amount bears to the aggregate reported amount.“(II) Special rule for noncalendar year taxpayers.—In the case of any taxable year which does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for such taxable year, subclause (I) shall be applied by substituting ‘post-December reported amount’ for ‘aggregate reported amount’ and no excess reported amount shall be allocated to any dividend paid on or before December 31 of such taxable year.“(iv) Definitions.—For purposes of this subparagraph—“(I) Reported short-term capital gain dividend amount.—The term ‘reported short-term capital gain dividend amount’ means the amount reported to its shareholders under clause (i) as a short-term capital gain dividend.124 STAT. 3547“(II) Excess reported amount.—The term ‘excess reported amount’ means the excess of the aggregate reported amount over the qualified short-term gain of the company for the taxable year.“(III) Aggregate reported amount.—The term ‘aggregate reported amount’ means the aggregate amount of dividends reported by the company under clause (i) as short-term capital gain dividends for the taxable year (including short-term capital gain dividends paid after the close of the taxable year described in section 855).“(IV) Post-december reported amount.—The term ‘post-December reported amount’ means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year.“(v) Termination.—The term ‘short-term capital gain dividend’ shall not include any dividend with respect to”.(g) Conforming Amendments.—Section 855 is amended—(1) by striking subsection (c) and redesignating subsection (d) as subsection (c), and(2) by striking “, (c) and (d)” in subsection (a) and inserting “and (c)”.(h) Effective Date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.(i) Application of JGTRRA Sunset.—Section 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003 shall apply to the amendments made by subparagraphs (B) and (D) of subsection (e)(1) to the same extent and in the same manner as section 303 of such Act applies to the amendments made by section 302 of such Act.