Proposed Transaction Disclosure Unnecessary for Registered Investment Companies

Washington, DC, September 5, 2002 - Registered investment companies (RICs) are not tax avoidance vehicles and should not be subject to the disclosure requirements resulting from a proposal by the Treasury Department to expand the definition of "reportable transaction," according to a recent Institute comment letter.

The Treasury has announced an initiative to broaden and align the rules and regulations for disclosure, registration, and list-keeping of abusive tax avoidance transactions. The initiative would expand the definition of a "reportable transaction."

In its letter, the Institute stated that the expanded definition will place undue disclosure burdens on registered investment companies (RICs) engaged in routine portfolio transactions on behalf of their shareholders. The Institute therefore requested that the Treasury adopt specific rules exempting RICs from disclosure obligations for loss transactions, transactions with brief asset holding periods, and transactions with significant book-tax differences. The Institute stated that such disclosure exemptions would be appropriate because RICs are not tax-avoidance vehicles. In addition, RICs are already subject to extensive SEC regulation and the income and excise tax regimes to which RICs are subject effectively preclude tax avoidance by investors. The Institute also requested that the Treasury Department provide comparable disclosure exemptions for domestic master-fund partnerships with RIC partners.