Relief for money market funds | KPMG | US

Relief for money market funds, contributions from advisers

Relief for money market funds

The IRS today released an advance version of Rev. Proc. 2016-31 that provides temporary relief for certain money market funds (MMFs) that receive contributions from their advisers as the MMFs transition to comply with U.S. Securities and Exchange Commission (SEC) rules that change how certain MMF shares are priced.


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Rev. Proc. 2016-31 [PDF 96 KB] provides that certain contributions that money market funds receive from sponsors may be excluded from the distribution requirements of section 852(a) but are included in investment company taxable income for purposes of section 852(b).


The IRS explained that “in the interest of sound tax administration” section 852 will be applied in a manner that will support the efforts of the staff of the SEC Division of Investment Management to facilitate a smooth transition to compliance with SEC MMF reform rules. The revenue procedure states that excluding certain adviser contributions from a regulated investment company’s (RIC’s) investment company taxable income for purposes of the distribution requirements in section 852(a) will facilitate those contributions but that the contributions are to be excluded from the RIC’s income for other federal tax purposes. 

Rev. Proc. 2016-31 applies to a top-up contribution that is received by an MMF as part of a transition to implement the floating net asset value per share (NAV) reform before the October 14, 2016 compliance deadline. If an MMF receives an eligible contribution, the IRS will not challenge the MMF’s treatment of the contribution as an amount that is included in investment company taxable income (ICTI) for purposes of section 852(b)(2), but is excluded from ICTI for purposes of section 852(a)(1). An example illustrating this treatment is provided.

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