AICPA recommends changes to mutual fund regs.

The AICPATax Division's International Taxation Technical Resource Panel recently submitted a comment letter to the IRS, recommending that it amend Sec. 853 regulations to conform to Code changes made more than 20 years ago. A "clean-up" amendment would simplify reporting requirements for mutual fund shareholders by eliminating unnecessary information, thus enhancing shareholder compliance.

A significant number of mutual funds invest assets abroad and can pass through a foreign tax credit to their shareholders. The typical international mutual fund has investments in 15 to 35 different countries, but pays only an insignificant amount of foreign taxes per share. The AICPA proposal would reduce fund administrators' time and expense (often passed on to shareholders) of providing superfluous tax information.

The AICPA comments included proposed amendments to the Sec. 853 regulations and recommended that Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), indicate that distributions from regulated investment companies are exempt from per-country reporting. The comments also suggest changing the due date for certain shareholder notices to 60 days, to conform to 1986 law changes.

The proposal provides a no-cost opportunity to improve shareholder tax compliance, enhance investor relations and reduce fund expenses. No revenue will be lost, because the changes do not affect the computation of taxes, either directly or indirectly; rather, they simply eliminate reporting voluminous, unused information, thereby reducing fund expenses for compiling information, drafting, printing and mailing, and answering phone calls from perplexed shareholders. Finally, the proposal eliminates the confusion caused by the extensive table required to report per-country information. The AICPA's comment letter is available at www.cpa2biz.com/ResourceCenters/ Tax/International/FTC_rptg_mutual_funds.htm.