June 19, 1991
TO: TAX COMMITTEE NO. 18-91
RE: INSTITUTE TESTIMONY ON PENNSYLVANIA PASS-THROUGH LEGISLATION
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As we previously informed you, a bill to permit funds to
"pass through" federal obligation interest free of state tax has
been introduced in the Pennsylvania Senate by the Chairman of its
Finance Committee. (See Institute Memorandum to Tax Committee
No. 13-91, dated May 24, 1991). Attached is testimony given by
the Institute in support of the bill at a Pennsylvania Senate
Finance Committee hearing. The testimony mentions certain
proposed amendments to the bill (also attached) that would ease
the complexity of computing the exempt portion of the fund's
income and gain and the shareholder's gain on redemption of fund
shares. Specifically, the amendments would (1) determine
separately the exempt portion of income distributions and gain
distributions based upon the source of that income and gain and
(2) calculate the portion of a shareholder's redemption proceeds
exempt from tax using a "tax-exempt ratio" based upon the
percentage of the fund's assets in exempt obligations at the end
of each fiscal quarter ending with the calendar year of the
redemption.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachments