AN ACT CONCERNING THE ASSET REQUIREMENT FOR MUTUAL FUNDS TO BE QUALIFIED TO PAY EXEMPT-INTEREST DIVIDENDS.

Plain English Breakdown

Checked against official source text during the last sync.

Removing Asset Rules for Tax-Exempt Mutual Fund Dividends

This bill removes a rule that required mutual funds to hold at least half their assets in state or local government debt to pay tax-free dividends.

What This Bill Does

• Eliminates the requirement that fifty percent of a mutual fund's assets must be state and municipal obligations.
• Changes how mutual funds qualify to pay exempt-interest dividends for personal income tax purposes.

Who It Names or Affects

• Mutual funds
• Investors who receive dividend payments from these funds

Terms To Know

Exempt-interest dividends

Dividend payments that are not taxed for personal income tax purposes.

State and municipal government obligations

Debt issued by state or local governments, such as bonds.

Limits and Unknowns

• The official text does not specify an effective date for when this change begins.
• The source material only mentions the removal of the fifty percent rule and does not describe other asset requirements that may apply.

Official Summary Text

To eliminate the requirement that at least fifty per cent of the assets of a mutual fund consist of state and municipal government obligations for the fund to be qualified to pay exempt dividends, for purposes of the personal income tax.

Current Bill Text

LCO No. 692 1 of 1

General Assembly Proposed Bill No. 5088
February Session, 2026 LCO No. 692

Referred to Committee on FINANCE, REVENUE AND
BONDING

Introduced by:
REP. CARNEY, 23rd Dist.

AN ACT CONCERNING THE ASSET REQUIREMENT FOR MUTUAL
FUNDS TO BE QUALIFIED TO PAY EXEMPT-INTEREST DIVIDENDS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:

That chapter 229 of the general statutes be amended to eliminate the 1
requirement that at least fifty per cent of the assets of a mutual fund 2
consist of state and municipal government obligations for the fund to be 3
qualified to pay exempt dividends, for purposes of the personal income 4
tax. 5
Statement of Purpose:
To eliminate the requirement that at least fifty per cent of the assets of a
mutual fund consist of state and municipal government obligations for
the fund to be qualified to pay exempt dividends, for purposes of the
personal income tax.