The IRS has recently issued Proposed Regulations under Section 851(b) of the Internal Revenue Code (the “Proposed Regulations”), and a Revenue Procedure that address the treatment to regulated investment companies (“RICs”) with respect to income from certain commodities-linked notes (“CLNs”) and income from subsidiaries investing in commodities and commodities derivatives.

The preamble to the Proposed Regulations provides that the IRS will no longer issue private letter rulings (“PLRs”) on whether income from a financial instrument or position (such as CLNs) is income from a “security” under §2(a)(36) of the Investment Company Act of 1940, that would therefore be qualifying income for purposes of the income test applicable to RICs. Simultaneously with the release of the Proposed Regulations, the IRS issued a revenue procedure to this effect (the “Revenue Procedure”).