SAVINGS PROVISIONS FOR FAILURES OF REGULATED INVESTMENT COMPANIES TO SATISFY GROSS INCOME AND ASSET TESTS.

SEC. 201. SAVINGS PROVISIONS FOR FAILURES OF REGULATED INVESTMENT COMPANIES TO SATISFY GROSS INCOME AND ASSET TESTS.(a) Asset Test.—Subsection (d) of section 851 is amended—(1) by striking “A corporation which meets” and inserting the following:“(1) In general.—A corporation which meets”, and(2) by adding at the end the following new paragraph:“(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—“(A) In general.—A corporation that fails to meet the requirements of subsection (b)(3) (other than a failure described in subparagraph (B)(i)) for such quarter shall nevertheless be considered to have satisfied the requirements of such subsection for such quarter if—“(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,“(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“(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“(II) the requirements of such subsection are otherwise met within the time period specified in subclause (I).“(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—124 STAT. 3540“(i) such failure is due to the ownership of assets the total value of which does not exceed the lesser of—“(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“(II) $10,000,000, and“(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“(II) the requirements of such subsection are otherwise met within the time period specified in subclause (I).“(C) Tax.—“(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) $50,000, or“(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.“(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.“(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.”.(b) Gross Income Test.—Section 851 is amended by adding at the end the following new subsection:“(i) Failure To Satisfy Gross Income Test.—“(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—“(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, and124 STAT. 3541“(B) the failure to meet such requirement is due to reasonable cause and not due to willful neglect.“(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—“(A) the gross income of such company which is not derived from sources referred to in subsection (b)(2), over“(B) ⅑ of the gross income of such company which is derived from such sources.”.(c) Deduction of Taxes Paid From Investment Company Taxable Income.—Paragraph (2) of section 852(b) is amended by adding at the end the following new subparagraph:“(G) There shall be deducted an amount equal to the tax imposed by subsections (d)(2) and (i) of section 851 for the taxable year.”.(d) Effective Date.—The amendments made by this section shall apply to 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.