July 22, 1991
TO: FEDERAL LEGISLATION MEMBERS NO. 11-91
FEDERAL LEGISLATION COMMITTEE NO. 12-91
RE: TAX SIMPLIFICATION LEGISLATION INCLUDES PFIC PROVISION
__________________________________________________________
House Ways and Means Committee Chairman Dan Rostenkowski
and Senate Finance Committee Chairman Lloyd Bentsen jointly have
introduced a comprehensive tax simplification bill. The
legislation, H.R. 2777/S. 1364, includes provisions to address
the problem of computing taxes on holdings of passive foreign
investment companies.
The legislation essentially reflects the Institute's
recommendations that mutual funds be permitted to elect to mark-
to-market their PFIC investments each year, i.e., treating them
as being sold as of the last day of the fund's taxable year. This
change would eliminate the substantial burden of continually
recomputing the fund's potential tax liability for its PFIC
shares. If passed the bill would be effective for taxable years
beginning after December 31, 1991.
The legislation also includes a provision to simplify the
foreign tax credit limitation for individuals.
The Institute will testify at hearings on the bill
scheduled for July 23 and 24 by the House Committee on Ways and
Means.
Copies of the relevant sections of the bill's explanation
have been attached for your review. We will keep you informed of
further developments.
This memo can also be found on FUNDS, the Institute's Fund
User Network and Delivery System, under Legislative Affairs,
Washington Update.
Julie Domenick
Vice President
Legislative Affairs