A regulated investment company—

(1) which holds (directly or indirectly) one or more tax credit bonds on one or more applicable dates during the taxable year, and

(2) which meets the requirements of section 852(a) for the taxable year (determined after the application of this section),

If the election provided in subsection (a) is in effect with respect to any credits for any taxable year—

the regulated investment company—

(A) shall not be allowed such credits,

(B) shall include in gross income (as interest) for such taxable year the amount which would have been so included with respect to such credits had the application of this section not been elected,

(C) shall include in earnings and profits the amount so included in gross income, and

(D) shall be treated as making one or more distributions of money with respect to its stock equal to the amount of such credits on the date or dates (on or after the applicable date for any such credit) during such taxable year (or following the close of the taxable year pursuant to section 855) selected by the company, and

each shareholder of such investment company shall—

(A) be treated as receiving such shareholder’s proportionate share of any distribution of money which is treated as made by such investment company under paragraph (1)(D), and

(B) be allowed credits against the tax imposed by this chapter equal to the amount of such distribution, subject to the provisions of this title applicable to the credit involved.

The amount treated as a distribution of money received by a shareholder under subsection (b)(2)(A) (and as credits allowed to such shareholder under subsection (b)(2)(B)) shall not exceed the amount so reported by the regulated investment company in a written statement furnished to such shareholder.

The election provided in subsection (a) shall be made in such manner as the Secretary may prescribe.

For purposes of this subsection—

For purposes of this subsection—

(A) Tax credit bondThe term “tax credit bond” means— (i) a qualified tax credit bond (as defined in section 54A(d)),1 (ii) a build America bond (as defined in section 54AA(d)) 1 other than a qualified bond described in section 54AA(g),1 and (iii) any bond for which a credit is allowable under subpart H of part IV of subchapter A of this chapter.1

(B) Applicable dateThe term “applicable date” means— (i) in the case of a qualified tax credit bond or a bond described in subparagraph (A)(iii), any credit allowance date (as defined in section 54A(e)(1)),1 and (ii) in the case of a build America bond (as defined in section 54AA(d)),1 any interest payment date (as defined in section 54AA(e)).1

(2) Stripped tax credit bonds If the ownership of a tax credit bond is separated from the credit with respect to such bond, subsection (a) shall be applied by reference to the instruments evidencing the entitlement to the credit rather than the tax credit bond.

The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including methods for determining a shareholder’s proportionate share of credits.

(Added Pub. L. 111–5, div. B, title I, § 1541(a), Feb. 17, 2009, 123 Stat. 360; amended Pub. L. 111–325, title III, § 301(d), Dec. 22, 2010, 124 Stat. 3544; Pub. L. 113–295, div. A, title II, § 209(h), Dec. 19, 2014, 128 Stat. 4029.)