The proposed regulations provide guidance on the requirements that are used to determine whether a corporation qualifies as a regulated investment company (RIC) for federal income tax purposes. The proposed regulations clarify that amounts included in gross income under §951(a)(1)(A)(i) or 1293(a) are treated as dividends only to the extent that there is an actual distribution out of the earnings and profits of the taxable year that are attributable to the amounts so included. The proposed regulations also clarify that inclusions under §§951(a)(1)(A)(i) and 1293(a) do not qualify as “other income” under §851(b)(2). In addition, the proposed regulations refer to Rev. Proc. 2016–50, a companion “no-rule” revenue procedure related to the treatment of a corporation as a RIC that requires a determination whether a financial instrument or position is a security under the 1940 Act.

Rev. Proc. 2016–50 supplements Rev. Proc. 2016–3, the annual “no-rule” revenue procedure, by adding to the list of areas in which the Service will not ordinarily rule any issue relating to the treatment of a corporation as a regulated investment company (RIC) under section 851 and related provisions that requires a determination whether a financial instrument or position is a security as defined in the Investment Company Act of 1940.

Revocation of IRC 501(c)(3) Organizations for failure to meet the code section requirements. Contributions made to the organizations by individual donors are no longer deductible under IRC 170(b)(1)(A).