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Bipartisan legislation changes unfair timing of capital gains tax on mutual funds

Washington, DC - Americans who invest in mutual funds can look forward to more profitable, long-term investing and a more secure retirement, thanks to a bipartisan bill introduced today by Senators Mike Crapo (R-Idaho) and Tim Johnson (D-South Dakota). The bill would allow shareholders who automatically reinvest distributions to keep more of their own money working for them longer by deferring capital gains taxes until they actually sell the investment. Senator Judd Gregg (R-New Hampshire), Ranking Member of the Senate Budget Committee, is also an original co-sponsor of the bill.

The bill remedies an unfairness in the tax code that complicates savings unnecessarily for middle-income Americans. Currently, shareholders in taxable mutual funds are subject to yearly capital gains taxes, even if no shares are sold and capital gains distributions are re-invested into fund shares. Under the Generating Retirement Ownership Through Long-Term Holding (GROWTH) Act, mutual fund investors would receive the same treatment as investors in individual stock, and would pay capital gains taxes only when the investment is sold.

"The government needs to do more to help Americans prepare for retirement; the tax code should help, not hinder, the process," Crapo, a member of both the Senate Finance and Banking Committees, said. "American families have historically-low savings rates. The GROWTH Act provides a better tool to grow long-term retirement investments, and this bipartisan legislation will be a step in doing everything we can to promote sound investing and preparation for retirement savings. I look forward to working with Senator Johnson and Senator Gregg to advance this legislation."

"The GROWTH Act would immediately help the more than 31 million Americans saving for retirement in mutual fund accounts outside of employer plans and/lor IRAs. The Act would provide sensible tax treatment that would defer - not avoid - taxation. In the process, it would better enable retirement savers to do what they are trying to do - plan for an uncertain road," Johnson said, a member of the Senate Banking Committee. "I am pleased to work with Senator Crapo on this legislation to encourage secure retirement savings."

Companion legislation for the GROWTH Act was introduced in the House (H.R. 2796) earlier this year. It has been referred to the House Ways and Means Committee. More information is also available at: