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Stradley on Investment Company Tax Legislation

Last week, we reported that HR 4337, the Regulated Investment Company Modernization Act (HR 4337), a bill that would modify mutual fund tax regulations for the first time in more than 20 years, was passed by the House.  In our post, we reported that the bill, if enacted, among other very important changes to taxation of registered investment companies (RICs), would also eliminate restrictions on the investment of RICs in commodities.  The Stradley Ronon law firm has issued a memorandum focused in particular on the proposed modification of RIC qualifying income to include income from commodities.  The memo also takes a look at  the substantive differences between HR 4337 as originally proposed and the version of the bill passed by the House last week.

Stradley's memo breaks down in bullets some of the details of how the commodities feature would be applied to RICs, describing the mechanics of  how the bill would allow RICs to derive qualifying income from investments in commodities, which include foreign currencies.  

Stradley also summarizes the state of play for this bill in Congress:

The Act is now in the Senate. It is unclear whether the Act will have opposition in the Senate (although certain commentators have suggested that it is unopposed). Additionally, the Act could be coupled with another more controversial bill. On Sept. 29, 2010, the Act was read for the first time in the Senate and placed on the Senate Legislative Calendar under Read the First Time. While nothing is certain, it is not likely that any further action will be taken on the Act in the Senate until after the November elections. Further, if passed by the Senate with any amendments, it will have to be reconciled in the House, further delaying its passage.

Though it looks as if further action on this bill is fairly far off, the Stradley memorandum provides some analysis of what it may mean for funds and the fund industry.

The full text of the Stradley memo is available at:


The full text of HR 4337 is available at:

The official, section-by-section, summary of the  Regulated Investment Company Modernization Act is available at:  

A detailed analysis of HR 4337 is available from Stradley Ronon at: