Fidelity Investments is taking a public stand to support changes to the tax treatment of mutual funds. Stephen Fisher
, senior vice president and deputy general counsel at the Boston Behemoth, testified in support of Rep. Charlie Rangel's (D-New York) bill that was initially introduced last fall. Fisher's testimony was reported by the WSJ Fund Track column
Fisher spoke the disparate tax treatment of funds-of-funds compared to even the treatment of standard mutual funds. Fund-of-funds cannot pass on the tax benefits of municipal bonds and foreign security tax credits, testified Fisher.
House Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neil (D-Massachusetts) called the RIC Modernization Hearing (see agenda
) on "The Regulated Investment Company Modernization Act of 2009" (H.R. 4337
The paper did not report on the testimony of the two additional
witnesses: William M. Paul
of Covington & Burling and Joseph A. Riley
of Willkie Farr & Gallagher.
Fidelity's Fisher also raised complexities faced by sponsors of mutual funds with multiple share classes, pointing out that the structure makes it easier to inadvertently pay shareholders a preferential dividend, thereby creating a corporate tax liability for the mutual fund.
He also noted carry loss forward rules that limit funds to eight years for mutual fund investors compared to indefinite carry forwards for investors in individual securities.
A third major issue addressed by Fisher to the committee are the unintended tax consequences of treating investment companies as conventional "C" corporations.
RICs are Washington shorthand for "regulated investment companies," or mutual funds.
Sean Hanna, Editor in Chief
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