November 22, 1991
TO: TAX MEMBERS NO. 53-91
RE: EXEMPTION FROM DELAWARE CORPORATE INCOME TAX FOR REGULATED
INVESTMENT COMPANIES
__________________________________________________________
The attached Tax Ruling 91-1 from the Delaware Division of
Revenue clarifies the treatment of regulated investment companies
("RICs") for purposes of the Delaware corporate income tax.
Among the issues dealt with in the Ruling are the following:
1. A RIC which is a Delaware business trust that is
treated as a corporation for federal income tax
purposes also will be treated as a corporation for
Delaware purposes.
2. A Delaware RIC is exempt from Delaware corporate tax
only if it meets certain requirements, including the
requirement that its income be derived solely from
investments in intangible assets. For purposes of
this requirement, a RIC, all of whose gross income is
described in section 851(b)(2) of the Internal Revenue
Code of 1986, will be considered to have met this
requirement. However, the RIC's income must be
derived solely from qualified income as defined in
Code section 851(b)(2). Fee waivers, expense
reimbursements by the fund manager and other income of
this sort will be considered derived from the business
of investing in intangible property, and will not
cause a RIC to become taxable as a corporation upon
receipt of such income by the RIC.
We will keep you informed of further developments.
David J. Mangefrida, Jr.
Assistant Counsel - Tax
Attachment
DJM:bmb