March 9, 1992
TO: UNIT INVESTMENT TRUST COMMITTEE NO. 13-92
TENNESSEE MEMBERS
MEMBERS WITH TENNESSEE BOND FUNDS
RE: TENNESSEE DENIAL OF PASS-THROUGH FOR TENNESSEE OBLIGATIONS
__________________________________________________________
As you know, the Tennessee Commissioner of Revenue has
announced that as of April 1, 1992, the state will no longer
allow an exemption from the Hall income tax for mutual fund
dividends or unit investment trust distributions attributable to
Tennessee State or local obligations. This position is justified
based on an opinion of the Tennessee Attorney General that
exempting income of Tennessee obligations passed through a mutual
fund or UIT while taxing federal obligations unconstitutionally
discriminates against federal obligations. A bill has been
introduced into the Legislature, designated House Bill 2603 and
Senate Bill 2726, which would remove the justification for the
Commissioner's action by extending the exemption to mutual fund
dividends and UIT distributions derived from interest on federal
obligations.
The Institute has been working with its local counsel and
other interested parties in Tennessee in support of this bill.
There will be a hearing on the bill on March 23, 1992, before the
Business Tax Study Committee. If approved by the Committee, it
will be referred to the House and Senate Finance Ways and Means
Committees for their approval, and then will be voted upon by
both houses of the Legislature. The two vital steps are with the
Business Tax Study Committee and the two revenue committees.
While the Institute believes that the bill has an excellent
chance of passage, it can only succeed with the support of your
Tennessee investors and the Tennessee brokers through which you
sell.
The Institute urges you to contact your investors
IMMEDIATELY. They should be encouraged to contact either members
of the Business Tax Study Committee or the two revenue
Committees. They could also be encouraged to contact their local
legislators and urge the legislators to contact the members of
the committees in support of the bill. Attached are talking
points which may be used in drafting an investor letter, as well
as lists of the members of the three committees.
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The Institute also urges members to contact the brokerage
firms through which their Tennessee products are distributed and
urge them to send a representative to the meeting to be held on
March 12, 1992 at noon in the offices of our local counsel, Bass,
Berry and Sims, First American Center, 27th Floor, Nashville, TN.
At that meeting the Institute will brief the brokerage
representatives on the situation and what they can do to help
influence passage of the bill. Talking points for individual
brokers will be distributed at the meeting.
We will keep you informed of developments on this issue.
David J. Mangefrida Jr.
Assistant Counsel - Tax
Attachment