(a) General rule
A regulated investment company—
(1) which holds (directly or indirectly) one or more tax credit bonds on one or more applicable dates during the taxable year, and
(2) which meets the requirements of section 852(a) for the taxable year,
may elect the application of this section with respect to credits allowable to the investment company during such taxable year with respect to such bonds.
(b) Effect of election
If the election provided in subsection (a) is in effect for any taxable year—
(1) the regulated investment company shall not be allowed any credits to which subsection (a) applies for such taxable year,
(2) the regulated investment company shall—
(A) include in gross income (as interest) for such taxable year an amount equal to the amount that such investment company would have included in gross income with respect to such credits if this section did not apply, and
(B) increase the amount of the dividends paid deduction for such taxable year by the amount of such income, and
(3) each shareholder of such investment company shall—
(A) include in gross income an amount equal to such shareholder’s proportionate share of the interest income attributable to such credits, and
(B) be allowed the shareholder’s proportionate share of such credits against the tax imposed by this chapter.
(c) Statements to shareholders
For purposes of subsection (b)(3), the shareholder’s proportionate share of—
(1) credits described in subsection (a), and
(2) gross income in respect of such credits,
shall not exceed the amounts so reported by the regulated investment company in a written statement furnished to such shareholder.
(d) Manner of making election
The election provided in subsection (a) shall be made in such manner as the Secretary may prescribe.
(e) Definitions and special rules
For purposes of this subsection—
(A) Tax credit bond
The term “tax credit bond” means—
(i) a qualified tax credit bond (as defined in section 54A(d)),
(ii) a build America bond (as defined in section 54AA(d)), and
(iii) any bond for which a credit is allowable under subpart H of part IV of subchapter A of this chapter.
(B) Applicable date
The term “applicable date” means—
(i) in the case of a qualified tax credit bond or a bond described in subparagraph (A)(iii), any credit allowance date (as defined in section 54A(e)(1)), and
(ii) in the case of a build America bond (as defined in section 54AA(d)), any interest payment date (as defined in section 54AA(e)).
(2) Stripped tax credit bonds
If the ownership of a tax credit bond is separated from the credit with respect to such bond, subsection (a) shall be applied by reference to the instruments evidencing the entitlement to the credit rather than the tax credit bond.
(f) Regulations, etc.
The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including methods for determining a shareholder’s proportionate share of credits.
(Added Pub. L. 111–5, div. B, title I, §1541(a), Feb. 17, 2009, 123 Stat. 360; amended Pub. L. 111–325, title III, §301(d), Dec. 22, 2010, 124 Stat. 3544.)
2010—Subsec. (c). Pub. L. 111–325, §301(d)(1), substituted “Statements” for “Notice” in heading and “so reported by the regulated investment company in a written statement furnished to such shareholder” for “so designated by the regulated investment company in a written notice mailed to its shareholders not later than 60 days after the close of its taxable year” in concluding provisions.
Subsec. (d). Pub. L. 111–325, §301(d)(2), struck out “and notifying shareholders” after “election” in heading and “and the notice to shareholders required by subsection (c)” after “subsection (a)” in text.
Effective Date of 2010 Amendment
Amendment by Pub. L. 111–325 applicable to taxable years beginning after Dec. 22, 2010, see section 301(h) of Pub. L. 111–325, set out as a note under section 852 of this title.
Section applicable to taxable years ending after Feb. 17, 2009, see section 1541(c) of Pub. L. 111–5, set out as an Effective Date of 2009 Amendment note under section 54 of this title.