October 8, 1992
TO: TAX MEMBERS NO. 64-92
OPERATIONS MEMBERS NO. 36-92
TRANSFER AGENT ADVISORY COMMITTEE NO. 57-92
INSTITUTIONAL FUNDS COMMITTEE NO. 20-92
RE: TAX PROVISIONS IN ENERGY BILL
__________________________________________________________
The Senate today gave final approval to the energy bill
(H.R. 776), which was passed by the House on October 5. The
President has ten days from receipt of the bill to sign or veto
it. Two tax provisions in the bill, relating to investments by
nuclear decommissioning funds and the rate at which backup
withholding is imposed, are of interest to regulated investment
companies ("RICs") and their shareholders.
As you may know, the IRS issued proposed regulations last
year which would allow nuclear decommissioning funds to invest in
RICs that meet certain conditions concerning assets and conduct.
(See Institute Memorandum to Tax Committee No. 28-91 and
Institutional Funds Committee No. 5-91, dated August 23, 1991.)
The attached provision of the energy bill (Attachment A) repeals
the present-law investment restrictions entirely, effective for
taxable years beginning after December 31, 1992.
As we previously informed you, the tax bill passed by the
Senate on September 29, 1992 would have increased the Code
section 3406 backup withholding rate from 20 percent to 31
percent. (See Institute Memorandum to Tax Members No. 59-92,
Accounting/Treasurers Members No. 35-92, Closed-End Fund Members
No. 36-92, Operations Members No. 32-92, Unit Investment Trust
Members No. 49-92, International Members No. 20-92 and Transfer
Agent Advisory Committee No. 52-92, dated September 30, 1992.)
Pursuant to the Conference Committee agreements on the tax and
energy bills, the provision increasing the backup withholding
rate to 31 percent, effective for amounts paid after December 31,
1992 (Attachment B), has been deleted from the tax bill and is
included in the energy bill.
We will keep you informed of developments.
Keith D. Lawson
Associate Counsel - Tax
Attachments