Stephen Hamilton Comments on the IRS’s Recently Released Investment Company Pass-Through Write-Off Rules

Bloomberg Law reports that on June 24, 2020, the IRS released final rules (T.D. 9899) for how the tax law’s 20% deduction works for regulated investment companies (RICs), many of which are mutual funds, which receive dividends from real estate investment trusts. The publication turned to Philadelphia tax partner Stephen Hamilton for insight into the new rules.

The final rules adopt several parts of a proposed version. The write-off must be reduced by losses or deductions that are partially disallowed in the same tax year, for instance, as well as “conduit treatment” of certain real estate investment trust dividends earned by regulated investment companies.

Hamilton praised the retention of the latter language, telling Bloomberg Law that it is “a reasonable interpretation” of the IRS’s authority under the 2017 tax law.

“That way, investors who invest in RICs will be treated the same as people who buy REIT shares directly, which I think is the desirable answer,” Hamilton added.