
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC4982]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                 Subtitle D--Miscellaneous Excise Taxes
 
                CHAPTER 44--QUALIFIED INVESTMENT ENTITIES
 
Sec. 4982. Excise tax on undistributed income of regulated 
        investment companies
        

(a) Imposition of tax

    There is hereby imposed a tax on every regulated investment company 
for each calendar year equal to 4 percent of the excess (if any) of--
        (1) the required distribution for such calendar year, over
        (2) the distributed amount for such calendar year.

(b) Required distribution

    For purposes of this section--

                           (1) In general

        The term ``required distribution'' means, with respect to any 
    calendar year, the sum of--
            (A) 98 percent of the regulated investment company's 
        ordinary income for such calendar year, plus
            (B) 98 percent of the regulated investment company's capital 
        gain net income for the 1-year period ending on October 31 of 
        such calendar year.

                (2) Increase by prior year shortfall

        The amount determined under paragraph (1) for any calendar year 
    shall be increased by the excess (if any) of--
            (A) the grossed up required distribution for the preceding 
        calendar year, over
            (B) the distributed amount for such preceding calendar year.

                (3) Grossed up required distribution

        The grossed up required distribution for any calendar year is 
    the required distribution for such year determined--
            (A) with the application of paragraph (2) to such taxable 
        year, and
            (B) by substituting ``100 percent'' for each percentage set 
        forth in paragraph (1).

(c) Distributed amount

    For purposes of this section--

                           (1) In general

        The term ``distributed amount'' means, with respect to any 
    calendar year, the sum of--
            (A) the deduction for dividends paid (as defined in section 
        561) during such calendar year, and
            (B) any amount on which tax is imposed under subsection 
        (b)(1) or (b)(3)(A) of section 852 for any taxable year ending 
        in such calendar year.

             (2) Increase by prior year overdistribution

        The amount determined under paragraph (1) for any calendar year 
    shall be increased by the excess (if any) of--
            (A) the distributed amount for the preceding calendar year 
        (determined with the application of this paragraph to such 
        preceding calendar year), over
            (B) the grossed up required distribution for such preceding 
        calendar year.

                 (3) Determination of dividends paid

        The amount of the dividends paid during any calendar year shall 
    be determined without regard to--
            (A) the provisions of section 855, and
            (B) any exempt-interest dividend as defined in section 
        852(b)(5).

(d) Time for payment of tax

    The tax imposed by this section for any calendar year shall be paid 
on or before March 15 of the following calendar year.

(e) Definitions and special rules

    For purposes of this section--

                         (1) Ordinary income

        The term ``ordinary income'' means the investment company 
    taxable income (as defined in section 852(b)(2)) determined--
            (A) without regard to subparagraphs (A) and (D) of section 
        852(b)(2),
            (B) by not taking into account any gain or loss from the 
        sale or exchange of a capital asset, and
            (C) by treating the calendar year as the company's taxable 
        year.

                     (2) Capital gain net income

        (A) In general

            Except as provided in subparagraph (B), the term ``capital 
        gain net income'' has the meaning given such term by section 
        1222(9) (determined by treating the 1-year period ending on 
        October 31 of any calendar year as the company's taxable year).

        (B) Reduction by net ordinary loss for calendar year

            The amount determined under subparagraph (A) shall be 
        reduced (but not below the net capital gain) by the amount of 
        the company's net ordinary loss for the calendar year.

        (C) Definitions

            For purposes of this paragraph--
            (i) Net capital gain

                The term ``net capital gain'' has the meaning given such 
            term by section 1222(11) (determined by treating the 1-year 
            period ending on October 31 of the calendar year as the 
            company's taxable year).
            (ii) Net ordinary loss

                The net ordinary loss for the calendar year is the 
            amount which would be the net operating loss of the company 
            for the calendar year if the amount of such loss were 
            determined in the same manner as ordinary income is 
            determined under paragraph (1).

              (3) Treatment of deficiency distributions

        In the case of any deficiency dividend (as defined in section 
    860(f))--
            (A) such dividend shall be taken into account when paid 
        without regard to section 860, and
            (B) any income giving rise to the adjustment shall be 
        treated as arising when the dividend is paid.

          (4) Election to use taxable year in certain cases

        (A) In general

            If--
                (i) the taxable year of the regulated investment company 
            ends with the month of November or December, and
                (ii) such company makes an election under this 
            paragraph,

        subsection (b)(1)(B) and paragraph (2) of this subsection shall 
        be applied by taking into account the company's taxable year in 
        lieu of the 1-year period ending on October 31 of the calendar 
        year.

        (B) Election revocable only with consent

            An election under this paragraph, once made, may be revoked 
        only with the consent of the Secretary.

      (5) Treatment of foreign currency gains and losses after 
                         October 31 of calendar year

        Any foreign currency gain or loss which is attributable to a 
    section 988 transaction and which is properly taken into account for 
    the portion of the calendar year after October 31 shall not be taken 
    into account in determining the amount of the ordinary income of the 
    regulated investment company for such calendar year but shall be 
    taken into account in determining the ordinary income of the 
    investment company for the following calendar year. In the case of 
    any company making an election under paragraph (4), the preceding 
    sentence shall be applied by substituting the last day of the 
    company's taxable year for October 31.

         (6) Treatment of gain recognized under section 1296

        For purposes of determining a regulated investment company's 
    ordinary income--
            (A) notwithstanding paragraph (1)(C), section 1296 shall be 
        applied as if such company's taxable year ended on October 31, 
        and
            (B) any ordinary gain or loss from an actual disposition of 
        stock in a passive foreign investment company during the portion 
        of the calendar year after October 31 shall be taken into 
        account in determining such regulated investment company's 
        ordinary income for the following calendar year.

    In the case of a company making an election under paragraph (4), the 
    preceding sentence shall be applied by substituting the last day of 
    the company's taxable year for October 31.

(f) Exception for certain regulated investment companies

    This section shall not apply to any regulated investment company for 
any calendar year if at all times during such calendar year each 
shareholder in such company was either--
        (1) a trust described in section 401(a) and exempt from tax 
    under section 501(a), or
        (2) a segregated asset account of a life insurance company held 
    in connection with variable contracts (as defined in section 
    817(d)).

For purposes of the preceding sentence, any shares attributable to an 
investment in the regulated investment company (not exceeding $250,000) 
made in connection with the organization of such company shall not be 
taken into account.

(Added Pub. L. 99-514, title VI, Sec. 651(a), Oct. 22, 1986, 100 Stat. 
2294; amended Pub. L. 100-203, title X, Sec. 10104(b)(1), Dec. 22, 1987, 
101 Stat. 1330-387; Pub. L. 100-647, title I, Sec. 1006(l)(2), (5), (6), 
Nov. 10, 1988, 102 Stat. 3413, 3414; Pub. L. 101-239, title VII, 
Sec. 7204(a)(1), Dec. 19, 1989, 103 Stat. 2334; Pub. L. 105-34, title 
XI, Sec. 1122(c)(1), Aug. 5, 1997, 111 Stat. 976.)


                               Amendments

    1997--Subsec. (e)(6). Pub. L. 105-34 added par. (6).
    1989--Subsec. (b)(1)(A). Pub. L. 101-239 substituted ``98 percent'' 
for ``97 percent''.
    1988--Subsec. (e)(2). Pub. L. 100-647, Sec. 1006(l)(2), amended par. 
(2) generally. Prior to amendment, par. (2) read as follows: ``The term 
`capital gain net income' has the meaning given to such term by section 
1222(9) (determined by treating the 1-year period ending on October 31 
of any calendar year as the company's taxable year).''
    Subsec. (e)(5). Pub. L. 100-647, Sec. 1006(l)(5), added par. (5).
    Subsec. (f). Pub. L. 100-647, Sec. 1006(l)(6), added subsec. (f).
    1987--Subsec. (b)(1)(B). Pub. L. 100-203 substituted ``98 percent'' 
for ``90 percent''.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-34 applicable to taxable years of United 
States persons beginning after Dec. 31, 1997, and to taxable years of 
foreign corporations ending with or within such taxable years of United 
States persons, see section 1124 of Pub. L. 105-34, set out as a note 
under section 532 of this title.


                    Effective Date of 1989 Amendment

    Section 7204(a)(2) of Pub. L. 101-239 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to calendar 
years ending after July 10, 1989.''


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1987 Amendment

    Section 10104(b)(2) of Pub. L. 100-203 provided that: ``The 
amendment made by paragraph (1) [amending this section] shall take 
effect as if included in the amendments made by section 651 of the Tax 
Reform Act of 1986 [section 651 of Pub. L. 99-514, see Effective Date 
note below].''


                             Effective Date

    Section 651(d) of Pub. L. 99-514 provided that: ``The amendments 
made by this section [enacting this section and amending sections 852 
and 855 of this title] shall apply to calendar years beginning after 
December 31, 1986.''

                  Section Referred to in Other Sections

    This section is referred to in section 852 of this title.
