EARNINGS AND PROFITS OF REGULATED INVESTMENT COMPANIES.

SEC. 302. EARNINGS AND PROFITS OF REGULATED INVESTMENT COMPANIES.(a) In General.—Paragraph (1) of section 852(c) is amended to read as follows:“(1) Treatment of nondeductible items.—“(A) Net capital loss.—If a regulated investment company has a net capital loss for any taxable year—“(i) such net capital loss shall not be taken into account for purposes of determining the company’s earnings and profits, and“(ii) any capital loss arising on the first day of the next taxable year by reason of clause (ii) or (iii) of section 1212(a)(3)(A) shall be treated as so arising for purposes of determining earnings and profits.“(B) Other nondeductible items.—“(i) In general.—The earnings and profits of a regulated investment company for any taxable year (but not its accumulated earnings and profits) shall not be reduced by any amount which is not allowable as a deduction (other than by reason of section 265 or 171(a)(2)) in computing its taxable income for such taxable year.124 STAT. 3548“(ii) Coordination with treatment of net capital losses.—Clause (i) shall not apply to a net capital loss to which subparagraph (A) applies.”.(b) Conforming Amendments.—(1) Subsection (c) of section 852 is amended by adding at the end the following new paragraph:“(4) Regulated investment company.—For purposes of this subsection, the term ‘regulated investment company’ includes a domestic corporation which is a regulated investment company determined without regard to the requirements of subsection (a).”.(2) Paragraphs (1)(A) and (2)(A) of section 871(k) are each amended by inserting “which meets the requirements of section 852(a) for the taxable year with respect to which the dividend is paid” before the period at the end.(c) Effective Date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.