The call for more tax awareness in the mutual fund industry has moved from Wall Street to Washington.

A House bill introduced March 11 calls for the Securities and Exchange Commission to require mutual funds to disclose after-tax performance in prospectuses. Current disclosures include performance histories that list returns after fees and expenses are levied.

Introduced by Rep. Paul E. Gillmor, R-Ohio, HR 1089 would give the SEC a year to revise regulations. The primary co-sponsor of the Mutual Fund Tax Awareness Act of 1999 is Rep. Edward J. Markey, D-Mass., and supporters include Rep. Michael Oxley, R-Ohio, and W.J. "Billy" Tauzin, R-La.

The sponsors "think that investors should be made aware of hidden taxes or undisclosed taxes on investments," a spokesman for Rep. Gillmor said.

The bill, originally introduced at the tail end of the last Congress, seeks to promote investors' "right to know all the relevant information," the spokesman added.

"Most mutual fund investors are simply not aware of the tax consequences they can face," Rep. Gillmor said in a prepared statement.

Thanks to the bull market, capital gains in mutual funds have been especially noticeable of late to people who own equity funds outside of tax-deferred accounts such as IRAs, retirement plans, and variable annuities.

About 40% of equity fund assets were in taxable accounts last year, according the Investment Company Institute. However, the Washington trade group has "not yet formed a position" on the bill, a spokesman said. "We're treating it as a very important issue."

The SEC itself is looking at ways to inform investors about tax implications of mutual fund investing, according to Susan Nash, senior assistant director of the commission's investment management division.

But tax liabilities are at the "bottom of a long list of things investors are not aware of," said Barbara Roper, director of investor protection for the Washington-based Consumer Federation of America. She cited fund expenses and strategies-both disclosed in prospectuses-as often being misunderstood.

The purpose of the bill seems to be to give people "more relevant performance information. And if done properly, that's a good thing," Ms. Roper said.

However, disclosures often go unnoticed, she said, because many Americans practice drive-through investing, getting prospectuses after buying shares.

Unless tax consequences are "translated into advertising of performance numbers, it's not clear to me that it will affect people's purchasing decisions," Ms. Roper said.

The rub is any explanation of tax consequences is muddled by various factors, including tax brackets and changing rates.

"It's not straightforward how to disclose it because obviously everybody is in a different tax situation," Ms. Nash of the SEC said.

Alternatives to disclosures include educational campaigns, she added.

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