Initially, there was a concern that Regulated Investment Companies (RICs) or mutual funds, that hold REITs and/or MLPs would be able to pass through the qualifying 199A dividends they received to shareholders. But the just released IRS REG 134652-18 clarifies this. From p.9
These proposed regulations provide rules under which a RIC that receives qualified REIT dividends may pay section 199A dividends. Non-corporate shareholders receiving section 199A dividends would treat them as qualified REIT dividends under section 199A(e)(3), provided the shareholder meets the holding period requirements for its shares in the RIC.
However, the new REG is not so clear with RIC pass-through distribution of MLP distributions they receive.
The Treasury Department and the IRS continue to evaluate whether it is appropriate to provide conduit treatment for qualified PTP income through RICs, and request detailed comments on these novel issues.
It’s clear that at least initially RICs will not pass through 199A dividends from publicly traded partnerships. As the quote above indicates, it’s at least possible this position will change after the Treasury has had time to study the question further, but I suspect the “novel issues” will be too thorny to make that possible.
BTW, getting these complicated regulations out in final form before the start of the first tax filing season to which they apply was an incredible effort by the Treasury. Besides dealing with many difficult issues they had to wade through more than 300 comments submitted by organizations and individuals, some of which were extensive.