TENNESSEE CLARIFIES EFFECTIVE DATE OF LEGISLATION PERMITTING PASS-THROUGH OF FEDERAL OBLIGATION INTEREST

June 2, 1992 TO: TAX MEMBERS NO. 38-92 UNIT INVESTMENT TRUST MEMBERS NO. 37-92 MONEY MARKET MEMBERS - ONE PER COMPLEX NO. 8-92 RE: TENNESSEE CLARIFIES EFFECTIVE DATE OF LEGISLATION PERMITTING PASS-THROUGH OF FEDERAL OBLIGATION INTEREST __________________________________________________________ As you know, Tennessee recently enacted legislation (Senate Bill 2726, classified as Public Chapter 931) which provides for an exemption from the state’s Hall Income Tax for dividends paid by regulated investment companies (RICs), distributions from unit investment trusts (UITs) and income of registered investment companies organized as limited partnerships, where such items are attributable to obligations of the United States, its agencies or instrumentalities. (See Institute Memorandum to Tax Members No. 34-92, Unit Investment Trust Members No. 30-92 and Money Market Members - One Per Complex No. 6-92, dated May 15, 1992.) The legislation also had the effect of reinstating a similar exemption for distributions derived from interest on Tennessee obligations which had been declared invalid by the Commissioner. Attached is a letter from the Tennessee Commissioner of Revenue to Richard Lodge, the Institute’s Tennessee counsel, which addresses the effect of Public Chapter 931 on RIC dividends, UIT distributions, and limited partnership income. The letter states that "dividends" (including, presumably UIT distributions and income from limited partnerships) received on or after January 1, 1992 will receive the exemption from tax, to the extent the dividends are derived from Tennessee or United States obligations. We will keep you informed of further developments. David J. Mangefrida Jr. Assistant Counsel - Tax Attachment