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Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice.
[19903]
March 30, 2006
TO: ADVISER DISTRIBUTOR TAX ISSUES TASK FORCE No. 2-06
TAX COMMITTEE No. 9-06
RE: INSTITUTE COMMENT LETTER ON CALIFORNIA APPORTIONMENT RULES
Attached is the Institute comment letter regarding California’s draft regulation on
apportionment for mutual fund service providers (“MFSPs”). Please provide suggested changes or
comments on this draft to Lisa Robinson (202-326-5835 or lrobinson@ici.org) by Monday, April 3,
2006 at 5:00 p.m. Eastern time.
The Institute letter recommends a number of changes to the regulation. First, the letter
reiterates the Institute’s general position that throw-out and throw-back rules should not be included in
the final regulation. The letter specifically requests elimination of a throw-back rule included in the
draft regulation that would prohibit an MFSP from assigning receipts to a state where the MFSP is not
taxable. Alternatively, the letter recommends that the regulation include states where an MFSP is
subject to tax and states that impose taxes other than income taxes for purposes of determining whether
an MFSP is taxable in a state.
Second, the letter requests that the regulation’s rules for obtaining information about
shareholder domicile and assignment of shares in omnibus accounts and asset pools such as retirement
accounts be made more flexible and administrable. Third, the letter requests that the regulation be
amended to permit an MFSP to use the MFSP’s taxable year in computing the shareholder ratio for all
of its regulated investment companies. Finally, the letter requests that the regulation provide an
effective date that allows sufficient time for MFSPs to modify or develop systems to comply with the
new rules and to prepare their California tax returns.
Lisa Robinson
Associate Counsel
Attachment (in .pdf format)