International Tax Simplification and Investment Competitiveness Bill Introduced

Washington, DC, June 4, 1999 - Legislation introduced as S. 1164 by Senators Orrin Hatch (R-UT), Max Baucus (D-MT), and Connie Mack (R-FL) would permit the character of U.S.-source interest and short-term capital gains to flow through a regulated investment company (RIC) to foreign shareholders. This legislation has been introduced as part of the bipartisan "International Tax Simplification for American Competitiveness Act of 1999." The "flow-through" provisions are comparable to those contained in the "International Tax Simplification for American Competitiveness Act" (S. 843 and H.R. 1783) and the "Investment Competitiveness Act of 1997" (H.R. 707), introduced during 1997. Similar 1998 legislation was limited to interest paid by certain U.S. bond funds to foreign shareholders.

Under present law, U.S.-source interest and short-term capital gains are exempt from U.S. withholding tax if received directly by a foreign investor, but not if the income flows through mutual funds and other RICs. The Institute supports this legislation because it would eliminate a U.S. tax barrier that effectively encourages foreign investors to invest in U.S. securities either directly or through foreign, rather than U.S., funds.