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Bill Would Streamline Mutual Fund Tax Code

The House Ways and Means Committee has introduced a bill that would streamline and modernize the tax code for mutual funds and their shareholders. For the past 50 years, the code has been adjusted piecemeal, and an entire review of the rules hasn't occurred for more than 20 years.

There are two separate rules, for example, for Form 1099, and mutual funds are still precluded from earning income from commodities.

Furthermore, there are various Internal Revenue Service rules for preferential dividends and shareholder communications about dividend designation requirements. Mutual fund companies have also experienced complications with the excise tax on undistributed income that Congress has required them to pay since 1986.

Lastly, mutual fund companies are subject to rules applying to both regulated investment companies and corporations, particularly with regards to redemptions and dividends.

"Today's investors face a wide spectrum of investment options, and we need to make sure that our tax laws are keeping pace with these choices," said Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.), who was one of the authors of the bill, along with Reps. Richard Neal (D-Mass.), Joe Crowley (D-N.Y.) and Allyson Schwartz (D-Pa.).

"By modernizing the rules that apply to registered investment companies, we can help minimize difficulties for funds and investors," Rangel added.

"These reforms have been discussed for many years, and the time has come to do simple and inexpensive updates to the code as it applies to mutual fund companies," Neal said.


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