The House Wednesday passed the Regulated Investment Company Modernization Act, which updates mutual fund tax regulations for the first time in more than 20 years.

Most notably, the new regulation will permit mutual funds to earn income from commodities and simplify rules on preferential dividends. It will also simplify excise taxes and streamline dual tax rules that apply to mutual funds: taxes on fund complexes as regulated investment companies and corporate tax rules on redemptions and dividends.

House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) and Select Revenue Measure Subcommittee Chairman Richard Neal (D-Mass.) introduced the legislation in December to reduce accounting problems for funds and their shareholders.

“Today’s investors face a wide spectrum of investment options, and we need to make sure that our tax laws are keeping pace with these choices,” Rangel said.

Investment Company Institute President and CEO Paul Schott Stevens said the industry applauds the passage of the new law.

“The legislation would not only improve the efficiency of funds’ investment structures and reduce disproportionate tax consequences for inadvertent errors,” Stevens said, “but also minimize the need for amended tax statements and amended tax return. Ultimately, this bill would eliminate uncertainties and allow appropriate innovations.”