September 16, 1992
TO: TAX COMMITTEE NO. 36-92
MONEY MARKET MEMBERS - ONE PER COMPLEX NO. 16-92
RE: INSTITUTE COMMENT LETTER ON MISSOURI PROPOSED PASS-THROUGH
REGULATIONS
__________________________________________________________
As we recently informed you, the Missouri Department of
Revenue has proposed that, in order for Missouri taxpayers to
claim the exemption from Missouri income tax for mutual fund
dividends attributable to federal obligation interest, the
shareholders would be required to attach to their returns "a
statement received from the mutual fund showing the amount of
monies received from each government obligation or the percentage
of funds received from each exempt obligation." (See Institute
Memorandum to Tax Committee No. 34-92 and Money Market Members -
One Per Complex No. 15-92, dated September 11, 1992.) No state
currently requires this obligation-by-obligation reporting.
Attached is the Institute’s comment letter on these
proposed regulations. In its letter, the Institute requests that
Missouri clarify that the statement to shareholders not be
required to list the fund’s federal interest on an obligation-by-
obligation basis. Instead, a fund should be permitted to provide
the percentage or dollar amount of its income which represents
all federal obligation interest earned by the fund. The comment
letter points out that states generally accept a report provided
only to shareholders that indicates the percentage of its income
derived from federal obligation interest as proof of the exempt
portion of a taxpayer’s dividend income.
In addition, the letter states that no benefit will be
derived from preparing an obligation-by-obligation breakdown for
the typical U.S. government fund, which holds hundreds of issues
of all different maturities, issue dates and interest rates.
Because no other state requires such reporting, funds would be
forced to incur the expense of preparing and mailing this report
only to Missouri shareholders. The Institute further explains
that a many-page report with hundreds of entries will be very
confusing to Missouri shareholders, and thus less useful than the
type of report currently used by funds.
We will keep you informed of further developments.
David J. Mangefrida Jr.
Assistant Counsel - Tax
Attachment