Code Section 853A


Code Section Effective Date Name of Act Name of Provision 10yr Revenue Estimate ($millions)
853A 2/17/2009 The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) Pass-through of credits on tax credit bonds held by regulated investment companies No revenue

Pass-through of credits on tax credit bonds held by regulated investment companies

Explanation of Provision

The Act provides procedures for passing though credits on ‘‘tax credit bonds’’ to the shareholders of an electing regulated investment company. In general, an electing regulated investment company is not allowed any credits with respect to any tax credit bonds it holds during any year for which an election is in effect. The company  is treated as having an amount of interest included in its gross income (and earnings and profits) in an amount equal that which would have been included if no election were in effect, and having made distributions of money equal to the amount of the credits. Each shareholder of the electing regulated investment company  is (1) required to include in gross income an amount equal to the shareholder’s proportional share of the interest attributable to its credits and (2) allowed such proportional share as a credit against such shareholder’s Federal income tax.211 In order to pass through tax credits to a shareholder, a regulated investment company is required to mail a written notice to such shareholder not later than 60 days after the close of the regulated investment company’s taxable year, designating the shareholder’s proportionate share of passed-through credits and the shareholder’s gross income in respect of such credits.212 The provision gives the Secretary authority to prescribe the time and manner in which a  regulated investment company makes the election to pass through credits on tax credit bonds. In addition, the provision requires the Secretary to prescribe such guidance as may be necessary to carry out the provision, including prescribing methods for determining a shareholder’s proportionate share of tax credits.A tax credit bond means a qualified tax credit bond as definedin section 54A(d), a Build America Bond (as defined in section 54AA(d)), and any other bond for which a credit is allowable under subpart H of part IV of subchapter A of the Code.

211- A technical correction may be necessary so that the statute reflects this intent.
-Return to Explanation of Provision

212- The provision was subsequently amended by section 301(d) of the Regulated Investment Company Modernization Act of 2010, Pub. L. 111–325, described in Part Seventeen of this document.
-Return to Explanation of Provision

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