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[20318]
August 25, 2006
TO: ADVISER DISTRIBUTOR TAX ISSUES TASK FORCE No. 9-06
TAX MEMBERS No. 31-06
RE: INSTITUTE COMMENT LETTER ON CALIFORNIA APPORTIONMENT RULES
Attached is the Institute’s comment letter regarding California’s proposed regulation on
apportionment for mutual fund service providers (“MFSPs”). The letter expressly states that it does
not address any of the issues (e.g., Finnigan) raised by Section (b)(1)(C) of the regulation.
The Institute letter recommends a number of changes to the California 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)
2
Note: Not all recipients receive the attachment. To obtain a copy of the attachment, please visit our members website
(http://members.ici.org) and search for memo 20318, or call the ICI Library at (202) 326-8304 and request the attachment
for memo 20318.