October 6, 1989
TO: MONEY MARKET FUND CHIEF EXECUTIVE OFFICERS NO. 8-89
TAX MEMBERS NO. 36-89
RE: KENTUCKY PASS-THROUGH OF FEDERAL OBLIGATION INTEREST
__________________________________________________________
As you know, the Institute has been working for some time
to eliminate state taxation of investment company dividends
derived from interest on federal obligations. We are pleased to
inform you that Kentucky has now become a "pass-through" state
with the release of the attached Revenue Policy Statement, which
reverses the position previously taken by the Kentucky Revenue
Cabinet. (See Institute Memorandum to Members - One Per Complex
No. 16-88, Tax Members No. 14-88, Closed-End Fund Members No. 16-
88, Unit Investment Trust Members No. 18-88 and Money Market
Chief Executive Officers No. 2-88, dated March 18, 1988.)
Under Revised Revenue Policy Statement 42P161, dated
September 1, 1989, dividends paid by a regulated investment
company ("RIC") attributable to interest derived from federal
obligations and Kentucky State obligations will not be taxable to
Kentucky shareholders. RICs are to provide their shareholders
residing in Kentucky with a statement on or before January 31
reflecting the amount of the RIC's "Kentucky income", according
to the Revenue Policy Statement. "Kentucky income" is determined
by multiplying the distributive income for the year by the ratio
of gross income subject to tax by Kentucky to total gross income.
This Revenue Policy Statement supersedes retroactively
Revenue Policy Statement 42P161, dated September 1, 1987, which
was effective for taxable years beginning on or after January 1,
1988.
We will keep you informed of developments.
Keith D. Lawson
Assistant General Counsel
Attachment