Bill would pave the way for mutual funds to invest in commodities

Mutual funds could invest directly in commodities under legislation introduced Wednesday by House Ways and Means Committee Chairman Charles Rangel, D-N.Y., and Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass. The Regulated Investment Company Modernization Act of 2009 (HR 4337) includes a number of provisions to update the tax laws that apply to mutual funds. The rules have been changed little since the 1930s. “These reforms have been discussed for many years, and the time has come to do simple and inexpensive updates to the code as it applies to mutual fund companies,” Mr. Neal said in a statement. The provisions would cost $188 million over the next 10 years, according to the Joint Committee on Taxation. “Today's investors face a wide spectrum of investment options, and we need to make sure that our tax laws are keeping pace with these choices,” Mr. Rangel said in a statement. “By modernizing the rules that apply to [mutual funds] we can help minimize difficulties for funds and investors.” In addition to allowing mutual funds to invest directly in commodities, other major provisions in the tax bill would give investors in funds of funds the same tax treatment for foreign tax payments that other mutual funds are able to take advantage of. The bill also would spare investors in some mutual funds from having to file amended tax returns if their funds recharacterize their distributions after the end of a fiscal year that differs from the calendar year.