Institute Urges Treasury to Simplify Tax Rules, July 2002

Washington, DC, July 10, 2002 - In conjunction with the Treasury Department's comprehensive review of the U.S. income tax system, the Institute has urged the Treasury to make changes to the Internal Revenue Code that would simplify the tax treatment of investment companies and their shareholders.

simplify the tax reporting to shareholders by permitting electronic delivery of all tax information returns and Subchapter M designation notices;
simplify the passive foreign investment company (PFIC) rules by eliminating application of the PFIC asset test to portfolio investors, including regulated investment companies (RICs); and
simplify the ability of RICs to be structured to meet shareholder needs by permitting flow through of tax-exempt interest and foreign tax credits in a "fund-of-funds" structure.

In a March letter to the Treasury, the Institute urged more fundamental changes to the code that would:

simplify the taxation of long-term capital gains;
make permanent the crucial improvements made to long-term savings vehicles in the Economic Growth and Tax Relief Reconciliation Act of 2001;
repeal the complex income eligibility rules applicable to individual retirement accounts (IRAs)-rules that have deterred many eligible individuals from using these vehicles to save for retirement; and
simplify the required minimum distribution requirements applicable to retirement plans and IRAs.

Previously, the Institute submitted a written statement to the House Committee on Ways and Means for a hearing on the need for the simplification of the Internal Revenue Code and a review of the Joint Committee on Taxation's study of the overall state of the federal tax system.