House Passes RIC Modernization Act of 2010

On September 28, the U.S. House of Representatives passed the Regulated Investment Company (RIC) Modernization Act of 2010 (the Act), which will go a long way toward updating and streamlining a number of mutual fund tax rules. It may be premature, however, to start celebrating. No companion bill is currently pending in the Senate, so the Act's prospects remain uncertain. On the upside, the Act is viewed as noncontroversial and, as a result of a slight tweak to the excise tax rules to increase the required distribution for capital gain net income of a RIC from 98% to 98.2%, it is now a revenue raiser. Following is an overview of some of the more significant changes that would arise if the Act is passed by the Senate in its current form and signed into law.