In a Revenue Procedure, the IRS has allowed regulated investment companies (RICs) to postpone to 2018 the inclusion of the Code Section 965 transition tax in gross income for purposes of computing their required distributions.
RICs can be any of several financial entities, from mutual fund trade funds to real estate investment rusts or 
unit investment trusts.
Excise Tax
RICs can be any of several financial entities, from mutual fund trade funds to real estate investment trusts or unit investment trusts.
The IRS imposes an excise tax on most RICs for each calendar year. The tax is equal to a nondeductible 4% on undistributed income (the excess of the required distribution for the calendar year over the distributed amount for that year). Included in the calculation of the required distribution is 98% of the RIC’s ordinary income for the calendar year.
The Internal Revenue Code defers to January 1 of the following year ordinary income from “specified gains and losses” that occur after October 31. “Specified gains and losses” is defined as ordinary gains or losses from the sale, exchange, or other disposition of property (including the termination of a position in such property). The term includes any foreign currency gain or loss attributable to investments in a foreign currency and any marketable shares of a passive foreign investment company (PFIC) that are marked to market.
The IRS imposes an excise tax on most RICs for each calendar year. The tax is equal to a nondeductible 4% on undistributed income (the excess of the required distribution for the calendar year over the distributed amount for that year). Included in the calculation of the required distribution is 98% of the RIC’s ordinary income for the calendar year.
The Internal Revenue Code defers to January 1 of the following year ordinary income from “specified gains and losses” that occur after October 31. “Specified gains and losses” is defined as ordinary gains or losses from the sale, exchange, or other disposition of property (including the termination of a position in such property). The term includes any foreign currency gain or loss attributable to investments in a foreign currency and any marketable shares of a passive foreign investment company (PFIC) that are marked to market.
Section 965
The Tax Cuts and Jobs Act (TCJA) levies a transition tax on post-1986 untaxed foreign earnings of specified foreign corporations owned by U.S. shareholders (Code Sec. 965). It does this by deeming those earnings to be repatriated. Under the TCJA, for the last tax year of a deferred foreign income corporation (DFIC) that began before January 1, 2018, subpart F income will be increased by the greater of the corporation’s accumulated post-’86 deferred foreign income determined as of either:
1.November 2, 2017, or
2.December 31, 2017.
Code Sec. 965(c) provides a deduction to a U.S. shareholder of a DFIC in the year that the U.S. shareholder has an inclusion because of Code Sec. 965.
An RIC that is a U.S. shareholder of such a DFIC must include in gross income its pro rata share of the DFIC’s subpart F income for its tax year that includes or ends on December 31, 2017. For excise tax purposes, the ordinary-income
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