what is a regulated investment company ric 
a regulated investment company ric can be any one of several investment entities for example it may take the form of a mutual fund or exchange traded fund etf a real estate investment trust reit or a unit investment trust uit whichever form the ric assumes the structure must be deemed eligible by the internal revenue service irs to pass through taxes for capital gains dividends or interest earned to the individual investors a regulated investment company is qualified to pass through income under regulation m of the irs with the specific regulations for qualifying as an ric delineated in u s code title 26 sections 851 through 855 860 and 4982 regulated investment company ric basicsthe purpose of utilizing pass through or flow through income is to avoid a double taxation scenario as would be the case if both the investment company and its investors paid tax on company generated income and profits the concept of pass through income is also referred to as the conduit theory as the investment company is functioning as a conduit for passing on capital gains dividends and interest to individual shareholders regulated investment companies do not pay taxes on their earnings without the regulated investment company allowance both the investment company and its investors would have to pay taxes on the company s capital gains or earnings with pass through income the company is not required to pay corporate income taxes on profits passed through to the shareholders the only income tax imposed is on individual shareholders requirements to qualify as an ricto qualify as a regulated investment company the business has to meet specific perimeters additionally an ric must derive a minimum of 90 of its income from capital gains interest or dividends earned on investments further an ric must distribute a minimum of 90 of its net investment income in the form of interest dividends or capital gains to its shareholders 