ICI Seeks Regulatory Guidance on Fund, Education Savings, and Retirement Security Issues, May 2004

May 4, 2004 - In a recent letter, the Institute letter urges the U.S. Treasury Department and the Internal Revenue Service include in their 2004-2005 IRS/Treasury Guidance Priority List guidance on certain issues affecting regulated investment companies (RICs) and their shareholders, education savings, and retirement security.

Background
In its letter, the Institute urges Treasury and IRS to provide prompt guidance on:

the implementation of the Jobs and Growth Tax Relief and Reconciliation Tax Act (JGTRRA), including guidance on "bifurcation" and on identifying qualified dividend income;
look-through of repurchase agreements to underlying government obligations for purposes of RIC diversification;
clarification that RICs that flow-through foreign tax credits to shareholders need not report those tax credits on a country-by-country basis; and
revisions to Circular 230 that include a targeted exemption from the definition of "tax shelter opinion" for unqualified opinions that the interest on municipal bonds is tax-exempt, and for opinions with respect to synthetic municipal investments.

The Institute also seeks guidance with respect to two education savings items that were included on the 2003-2004 business plan. First, regarding Section 529 plans, Treasury has stated that it believes that certain issues require a legislative resolution. The Institute requests that even if it is determined that legislation is necessary to resolve certain 529 plan issues, Treasury should provide much-needed guidance on remaining issues.

Second, with respect to reporting requirements for Coverdell ESA distributions, the Institute requests that Treasury issue final guidance that either: (1) incorporates the guidance issued in Notice 2003-53 (under which ESA custodians have no obligation to report basis and earnings); or (2) addresses Institute concerns with 2003 changes to Forms 1099-Q and 5498-ESA.

In addition, the Institute requests that guidance projects be opened on three retirement security issues:

implementation of the automatic rollover provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA);
provisions of EGTRRA that permit qualified plans and 403(b) annuity arrangements to include a "qualified Roth contribution program;" and
"orphan" or "abandoned" plans.

ICI Seeks Regulatory Guidance on RIC, Education, Retirement Issues