Senator EAGLETON. Thank you, Mr. Haase. Are there any other witnesses here present to testify on S. 3903 or S. 3904? If not that concludes the hearings then on those two measures and we will hear testimony on H.R. 15381 which is to amend the District of Columbia Income and Franchise Tax Act of 1947 with respect to the taxation of regulated investment companies. I will now place in the record a copy of the bill, the House report on the bill, and the letter of transmittal from the District of Columbia government. 918T CONGRESS 2D SESSION H. R. 15381 IN THE SENATE OF THE UNITED STATES FEBRUARY 25, 1970 Read twice and referred to the Committee on the District of Columbia AN ACT To amend the District of Columbia Income and Franchise Tax 1 Act of 1947 with respect to the taxation of regulated investment companies. Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,; 3 That title III of article I of the District of Columbia Income 4 and Franchise Tax Act of 1947 (D.C. Code, sec. 47-1557b) 5 is amended by inserting after paragraph (15) of section 3a 6 the following new paragraph: "(16) REGULATED INVESTMENT COMPANIES.In the case of a regulated investment company as de fined in section 851 of the Internal Revenue Code of 2 1954, which meets the requirements of section 852 (a) of the Internal Revenue Code of 1954 "(A) the dividends paid by the regulated investment company which qualify for the dividendspaid deduction under section 852 (b) (2) (D) and section 852 (b) (3) (A) (ii) of the Internal Reve nue Code of 1954, including dividends considered as having been paid during the taxable year by reason of section 855 of the Internal Revenue Code of 1954; and "(B) such amount as the regulated investment company shall designate for purposes of section 852 (b) (3) (D) (ii) of the Internal Revenue Code of 1954 as undistributed long-term capital gains to be included in computing the long-term capital gains of the shareholder. Such amounts shall be included as gains from the sale or exchange of capital assets, as defined in this article, in computing such share 1 2 3 4 3 holder's taxable income as defined in section 1 of title VI of this article." SEC. 2. The amendments made by this Act shall apply with respect to taxable years of regulated investment com 5 panies beginning after December 31, 1968. Passed the House of Representatives February 24, 1970. Attest: W. PAT JENNINGS, Clerk. FEBRUARY 20, 1970.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed Mr. MCMILLAN, from the Committee on the District of Columbia, submitted the following REPORT [To accompany H.R. 15381] The Committee on the District of Columbia, to whom was referred the bill (H.R. 15381) to amend the District of Columbia Income and Franchise Tax Act of 1947 with respect to the taxation of regulated investment companies, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. PURPOSE OF BILL The bill (H.R. 15381) would conform the provisions of the District of Columbia Income and Franchise Tax Act of 1947 (D.C. Code, title 47, section 1501 et seq., 61 Stat. 331) to the provisions of the Federal Internal Revenue Code relating to the treatment to be given to dividends paid by regulated investment companies which qualify for the dividends-paid deductions under section 852 (b) (2) (D) and section 852 (b) (3) (A) (ii) of the Internal Revenue Code of 1954. Its purpose is to make clear that investment companies domiciled in the District of Columbia will be accorded treatment under the laws of the District of Columbia similar to that which they are accorded under Federal law, namely, the flowthrough or conduit treatment in connection with their distribution of dividends to their shareholders. Regulated investment companies (mutual funds) which distribute their income currently are not subject to Federal income taxation. This is because mutual funds are merely conduits for the dividends and net gains which are passed on to the shareholders. Most states (including Maryland and Virginia) follow the Federal practice and do not tax mutual funds. 50-436 O-70-5 |