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August 24, 1990
TO: MEMBERS - ONE PER COMPLEX NO. 36-90
RE: PFIC SURVEY
__________________________________________________________
As you may know, the passive foreign investment company
("PFIC") rules were enacted in 1986 to limit the ability of U.S.
taxpayers to defer U.S. taxes on investment income by investing
in certain foreign companies that earn, but do not distribute,
"passive income". One significant flaw with the PFIC legislation
is that a corporate-level tax is effectively imposed on a
regulated investment company ("RIC") that receives a so-called
"excess distribution" from an investment in a PFIC or which
disposes of stock in a PFIC which the RIC has held in more than
one tax year. Because no mechanism currently exists in the PFIC
provisions to eliminate this RIC-level tax (which cannot be
credited against shareholders' tax liabilities), the Institute
has been pursuing regulatory or legislative relief. (See
Institute Memorandum to Tax Committee No. 23-90, dated August 22,
1990.)
Request for Data
The Institute will be meeting, along with other interested
parties, with Treasury and Internal Revenue Service officials on
September 17 to discuss the industry's problems with PFICs. The
Treasury has requested information about the magnitude of the
PFIC problem. In order to obtain the required information, a
survey relating to PFICs is attached.
To assist you in answering the survey, we have also
attached the first update of the list of known or suspected PFICs
which the Institute has compiled from members' responses to an
earlier survey (See Institute Memorandum to Accounting/Treasurers
Committee No. 18-90 and Tax Committee No. 14-90, dated June 22,
1990.)
All responses to these surveys will be kept strictly
confidential.
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As it is very important that the Institute have the
information the government has requested, we have asked that
responses to this survey be returned to the Institute by
September 7, 1990.
Please ensure that your fund complex responds to this
survey at your earliest convenience. If you have any questions
or comments regarding the survey or the issues to which it
relates please contact me at (202) 955-3521. We appreciate your
prompt attention to this survey.
David J. Mangefrida, Jr.
Assistant General Counsel
Enclosures
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