A regulated investment company (RIC) refers to a pooled investment vehicle set up under the US tax code to enjoy tax exemptions at the fund level. To qualify as a RIC, the fund needs to meet certain Income Tax Law requirements on asset diversification, source of income, distribution of profits, etc. RICs are very popular in the US asset management industry due to their tax efficiency. Typical examples include mutual funds and ETFs.
RIC refers to funds set up under the US tax code
A regulated investment company (RIC) is an investment company registered under the Investment Company Act of 1940 in the United States. It also elects to be treated as a RIC under the tax code and complies with the relevant requirements. The most common types of RICs are mutual funds and ETFs.
RIC enjoys corporate income tax exemption
A RIC meeting the requirements does not pay corporate income tax on investment income and capital gains distributed to shareholders. Only shareholders pay personal income tax on dividends and distributions received, which avoids double taxation at both corporate and shareholder levels.
RIC has diversification and source of income requirements
To qualify as a RIC, at least 50% of the total assets must be invested in cash, government securities, securities of other RICs, and other qualifying public traded securities at the end of each quarter; at least 90% of its annual gross income must be derived from dividends, interest, payments from securities loans, and gains from the sale or other disposition of stocks or securities.
In summary, a regulated investment company (RIC) refers to a fund registered under the US Investment Company Act and tax code to enjoy corporate income tax exemptions. Typical examples include mutual funds and ETFs in the US. RIC needs to meet diversification and source of income requirements.