December 14, 1993
TO: BOARD OF GOVERNORS NO. 113-93
MONEY MARKET MEMBERS - ONE PER COMPLEX NO. 10-93
TAX MEMBERS NO. 43-93
RE: PENNSYLVANIA ADOPTS PASS-THROUGH LEGISLATION
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As you may know, for almost 10 years the Institute has been engaged in
an effort to persuade states to exempt mutual fund dividends derived from
interest on federal obligations from their personal income taxes.
Pennsylvania was the last state that did not allow interest on federal
obligations to flow through to mutual fund shareholders free of state tax. We
are pleased to report that the Acting Governor of Pennsylvania recently signed
into law Senate Bill 565, which, effective for taxable years beginning after
December 31, 1992, exempts mutual fund dividends derived from interest on
federal obligations from Pennsylvania personal income tax. A copy of the bill
is attached.
The Institute will continue its efforts to eliminate the remaining
barriers to flow-through treatment of mutual fund dividends derived from
interest on federal obligations. For example, we will now turn our efforts to
those states that provide for exemption from tax only if federal obligations
make up more than a specific percentage of the fund's assets.
We will keep you informed of developments in this area.
Matthew P. Fink
President
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