Instructions for Form 1120-RIC, U.S. Income Tax Return For Regulated Investment Companies

• Issuer: Treasury Department
• Section: Treasury Department

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2023

Instructions for Form

1120-RIC

U.S. Income Tax Return for Regulated Investment Companies

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue Code

unless otherwise noted.

Contents Page

Photographs of Missing Children................ 1

The Taxpayer Advocate Service................. 1

How To Get Forms and Publications.............. 2

General Instructions......................... 2

Purpose of Form............................ 2

Who Must File............................. 2

General Requirements To Qualify as a RIC......... 2

Other Requirements......................... 2

Definition of a Fund.......................... 3

Where To File.............................. 3

When To File.............................. 3

Who Must Sign............................. 4

Paid Preparer Authorization.................... 4

Assembling the Return....................... 4

Tax Payments.............................. 5

Estimated Tax Payments...................... 5

Interest and Penalties........................ 5

Accounting Methods......................... 6

Accounting Periods.......................... 6

Rounding Off to Whole Dollars.................. 6

Recordkeeping ............................. 6

Other Forms That May Be Required.............. 6

Statements ............................... 7

Specific Instructions......................... 9

Period Covered............................ 9

Name and Address.......................... 9

Item B. Date RIC Was Established............... 9

Item C. Employer Identification Number (EIN)....... 9

Item D. Total Assets......................... 9

Item E. Final Return, Name Change, Address

Change, or Amended Return................ 9

Part I—Investment Company Taxable Income....... 9

Part II—Tax on Undistributed Net Capital Gain Not

Designated Under Section 852(b)(3)(D)....... 15

Schedule A—Deduction for Dividends Paid....... 15

Schedule B—Income From Tax-Exempt

Obligations ............................ 15

Schedule J—Tax Computation................. 15

Schedule K—Other Information................ 17

Schedule L—Balance Sheets per Books......... 19

Schedule M-1............................. 20

Future Developments

For the latest information about developments related to

Form 1120-RIC and its instructions, such as legislation

enacted after this form and instructions were published,

go to IRS.gov/Form1120RIC.

What’s New

Increase in penalty for failure to file. For tax returns

required to be filed in 2024, the minimum penalty for

failure to file a return that is over 60 days late has

increased to the smaller of the tax due or $485. See Late

filing of return, later.

Expiration of 100% business meal expense deduc-

tion. The temporary 100% business meal expenses

deduction for food and beverages provided by a

restaurant does not apply to amounts paid or incurred

after 2022.

Elective payment election. Applicable entities and

electing taxpayers can elect to treat certain credits as

elective payments. Any resulting overpayment may result

in refunds. See the instructions for line 28h. Also, see the

Instructions for Form 3800.

Photographs of Missing Children

The Internal Revenue Service is a proud partner with the

National Center for Missing & Exploited Children®

(NCMEC). Photographs of missing children selected by

the Center may appear in instructions on pages that would

otherwise be blank. You can help bring these children

home by looking at the photographs and calling

1-800-THE-LOST (1-800-843-5678) if you recognize a

child.

The Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) is an independent

organization within the IRS that helps taxpayers and

protects taxpayer rights. TAS's job is to ensure that every

taxpayer is treated fairly and knows and understands their

rights under the Taxpayer Bill of Rights.

As a taxpayer, the RIC has rights that the IRS must

abide by in its dealings with the RIC. TAS can help the RIC

if:

•A problem is causing financial difficulty for the business;

•The business is facing an immediate threat of adverse

action; or

•The RIC has tried repeatedly to contact the IRS but no

one has responded, or the IRS hasn't responded by the

date promised.

TAS has offices in every state, the District of Columbia,

and Puerto Rico. Local advocates' numbers are in their

Jan 25, 2024Cat. No. 64251J

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local directories and at TaxpayerAdvocate.IRS.gov. The

RIC can also call TAS at 877-777-4778.

TAS also works to resolve large-scale or systemic

problems that affect many taxpayers. If the RIC knows of

one of these broad issues, please report it to TAS through

the Systemic Advocacy Management System at

IRS.gov/SAMS.

For more information, go to IRS.gov/Advocate.

How To Get Forms

and Publications

Internet. You can access the IRS website 24 hours a day,

7 days a week, at IRS.gov to:

•Download forms, instructions, and publications;

•Order IRS products online;

•Research your tax questions online;

•Search publications online by topic or keyword;

•View Internal Revenue Bulletins (IRBs) published in

recent years; and

•Sign up to receive local and national tax news by email.

Tax forms and publications. The RIC can view,

download, or print all of the forms and publications it may

need at IRS.gov/FormsPubs.

Otherwise, the RIC can go to IRS.gov/OrderForms to

place an order and have forms mailed to it.

General Instructions

Purpose of Form

Use Form 1120-RIC, U.S. Income Tax Return for

Regulated Investment Companies, to report the income,

gains, losses, deductions, credits, and to figure the

income tax liability of a regulated investment company

(RIC) as defined in section 851.

Who Must File

A domestic corporation that meets certain conditions

(discussed below) must file Form 1120-RIC if it elects to

be treated as a RIC for the tax year (or has made an

election for a prior tax year and the election has not been

terminated or revoked). The election is made by

computing taxable income as a RIC on Form 1120-RIC.

Qualified opportunity funds. To certify as a qualified

opportunity fund (QOF), the RIC must file Form 1120-RIC

and attach Form 8996, even if the RIC had no income or

expenses to report. See Schedule K, Question 15. Also,

see the Instructions for Form 8996.

General Requirements To Qualify as a

RIC

The term “regulated investment company” applies to any

domestic corporation that:

•Is registered throughout the tax year as a management

company or unit investment trust under the Investment

Company Act of 1940 (ICA),

•Has an election in effect under the ICA to be treated as

a business development company, or

•Is a common trust fund or similar fund that is neither an

investment company under section 3(c)(3) of the ICA nor

a common trust fund as defined under section 584(a).

Other Requirements

In addition, the RIC must meet the (1) income test, (2)

asset test, and (3) distribution requirements explained

below.

The income test: At least 90% of its gross income must

be derived from the following items:

•Dividends;

•Interest (including tax-exempt interest income);

•Payments with respect to securities loans (as defined in

section 512(a)(5));

•Gains from the sale or other disposition of stock or

securities (as defined in ICA section 2(a)(36)) or foreign

currencies;

•Other income (including gains from options, futures, or

forward contracts) derived from the RIC's business of

investing in such stock, securities, or currencies; and

•Net income derived from an interest in a qualified

publicly traded partnership (as defined in section 851(h)).

Income from a partnership (other than a qualified

publicly traded partnership) or trust qualifies under the

90% test to the extent the RIC's distributive share of such

income is from items described above as realized by the

partnership or trust.

Income that a RIC receives in the normal course of

business as a reimbursement from its investment advisor

is qualifying income for purposes of the 90% test if the

reimbursement is includible in the RIC's gross income.

A RIC that fails to meet the requirements of section

851(b)(2) may still be considered to have satisfied the

requirements of this test if:

•Following the RIC's identification of the failure, a

description of each item of its gross income described in

section 851(b)(2) is set forth in a statement for the tax

year; and

•Failure to meet the requirements of this test is due to

reasonable cause and not due to willful neglect.

The asset test:

1.At the end of each quarter of the RIC's tax year, at

least 50% of the value of its assets must be invested in the

following items:

•Cash and cash items (including receivables);

•Government securities;

•Securities of other RICs; and

•Securities of other issuers, except that the investment in

a single issuer of securities may not exceed 5% of the

value of the RIC's assets or 10% of the outstanding voting

securities of the issuer (except as provided in section

851(e)).

2.At the end of each quarter of the RIC's tax year, no

more than 25% of the value of the RIC's assets may be

invested in the securities of:

•A single issuer (excluding government securities or

securities of other RICs);

•Two or more issuers controlled by the RIC and engaged

in the same or related trades or businesses; or

•One or more qualified publicly traded partnerships as

defined in section 851(h).

See sections 851(b)(3) and 851(c) for further details.

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