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TITLE 26-INTERNAL REVENUE CODE 83 Stat. 717; Mar. 29, 1975, Pub. L. 94-12, title VI, § 602(a)(2), 89 Stat. 58; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(109), 1906(b)(13)(A), 90 Stat. 1783, 1834.) REFERENCES IN TEXT The Investment Company Act of 1940, as amended, referred to in subsecs. (a)(1), (c)(5). (f), is act Aug. 22, 1940, ch. 686, title I, 54 Stat. 789, as amended, which is classified generally to subchapter I (§ 80a-1 et seq.) of chapter 2D of Title 15, Commerce and Trade. For com- plete classification of this Act to the Code, see section 80a-51 of Title 15 and Tables volume. AMENDMENTS 1976-Subsec. (a)(1). Pub. L. 94-455, § 1901(a)(109)(A), struck out "54 Stat. 789;" before "15 U.S.C. 80a-1 to 80b-2)". Subsec. (b). Pub. L. 94-455, § 1901(a)(109)(B), struck out "which began after December 31, 1941" following "previous taxable year" in par. (1), and "or his dele- gate" following "Secretary" in par. (4)(B). Subsecs. (c), d). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary" wherever appearing. 1975-Subsec. (b). Pub. L. 94-12 added provisions di- recting that, for purposes of par. (2), there shall be treated as dividends amounts included in gross income under section 951(a)(1)(A)(i) for the taxable year to the extent that, under section 959(a)(1), there is a dis- tribution out of earnings and profits of the taxable year which are attributable to the amounts so includ- ed. 1969-Subsec. (f). Pub. L. 91-172 added sub-c. (f). 1958-Subsec. (e)(1). Pub. L. 85-866, § 33' a), substi- tuted in the first sentence "not earlier than 60 days" for "not less than 60 days". Subsec. (e)(2). Pub. L. 85-866, § 38(b), substituted "issuer" for "issues". EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsecs. (a)(1) and (b)(1) by section 1901(a)(109) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. EFFECTxVE DATE OF 1975 AMENDMENT Amendment by Pub. L. 94-12 applicable to taxable years of foreign corporations beginning after Dec. 31, 1975, and to taxable years of United States sharehold- ers (within the meaning of section 951(b) of this title) within which or with which such taxable years of such foreign corporations end, see section 602(f) of Pub. L. 94-12, set out as an Effective Date of 1975 Amendment note under section 955 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Section 908(b) of Pub. L. 91-172 provided that: "The amendment made by subsection (a) [adding subsec. (f) of this section] shall apply to taxable years of unit in- vestment trusts ending after December 31, 1968, and to taxable years of holders of interests in such trusts ending with or within such taxable years of such trusts. The enactment of this section shall not be con- strued to result in the realization of gain or loss by any unit investment trust or by any holder of an inter- est in a unit investment trust." EFFECTIVE DATE OF 1958 AMENDMENT Amendment of subsecs. (e)(1) and (e)(2) by Pub. L. 85-866 applicable to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section l(c) of Pub. L. 85-866, set out as an Effective Date of 1958 Amendment note under section 165 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 11, 50B, 403, 853, 992, 1212, 1247 of this title. SECTION REFEIRED TO IN D.C. CODE This section is referred to in section 47-1557b of the District of Columbia Code. § 852. Taxation of regulated Investment companies and their shareholders (a) Requirements applicable to regulated investment companies The provisions of this part (other than sub- section (c) of this section) shall not be applica- ble to a regulated investment company for a taxable year unless- (1) the deduction for dividends paid during the taxable year (as defined in section 561, but without regard to capital gain dividends) equals or exceeds the sum of- (A) 90 percent of its investment'company taxable income for the taxable year deter- mined without regard to subsection (b)(2)(D); and (B) 90 percent of the excess of (i) its inter- est income excludable from gross income under section 103(a) over (if) its deductions disallowed under sections 265, 171(a)(2), and (2) the investment company complies for such year with regulations prescribed by the Secretary for the purpose of ascertaining the actual ownership of its outstanding stock. (b) Method of taxation of companies and sharehold. ers (1) Imposition of normal tax and surtax on regulat- ed investment companies There is hereby imposed for each taxable year upon the investment company taxable income of every regulated investment compa- ny a normal tax and surtax computed as pro- vided in section 11, as though the investment company taxable income were the taxable income referred to in section 11. (2) Investment company taxable income The investment company taxable income shall be the taxable income of the regulated investment company adjusted as follows: (A) There shall be excluded the amount of the net capital gain, if any. (B) The net operating loss deduction pro- vided in section 172 shall not be allowed. (C) The deductions for corporations pro- vided in part VIII (except section 248) in subchapter B (section 241 and following, re- lating to the deduction for dividends re- ceived, etc.) shall not be allowed. (D) The deduction for dividends paid (as defined in section 561) shall be allowed, but shall be computed without regard to capital gains dividends and exempt-interest divi- dends. (E) The taxable income shall be computed without regard to section 443(b) (relating to computation of tax on change of annual ac- counting period). (3) Capital gains (A) Imposition of tax There is hereby imposed for each taxable year in the case of every regulated invest- ment company a tax, determined as pro- vided in section 1201(a), on the excess, if any, of the net capital gain over the deduc- tion for dividends paid (as defined in section § 852 Page 538