An analysis of the Regulated Investment Company Modernization Act of 2010

Abstract

Purpose

The purpose of this paper is to explain the Regulated Investment Company Modernization Act of 2010, P.L. 111‐325, signed into law on December 22, 2010.

Design/methodology/approach

The paper summarizes the Act and provides a detailed explanation and analysis of each of the provisions in the Act.

Findings

An investment company registered under the Investment Company Act of 1940 may elect to be taxed as a Regulated Investment Company (RIC) under the Internal Revenue Code. A RIC that satisfies certain additional minimum distribution requirements is generally allowed to deduct the amount of dividends paid to its shareholders in computing the RIC's taxable income and gains, with the result that the RIC's distributed net income and gains can be passed through to its shareholders free of tax at the RIC level. The Act makes a number of changes to the provisions in the Code related to RICs.

Originality/value

The paper provides practical guidance from experienced financial services lawyers.

Citation

Hervey, R.M. (2011), "An analysis of the Regulated Investment Company Modernization Act of 2010", Journal of Investment Compliance, Vol. 12 No. 2, pp. 51-71. https://doi.org/10.1108/15285811111142919