(a) Capital gain dividend For purposes of section 1(h)(11) (relating to maximum rate of tax on dividends) and section 243 (relating to deductions for dividends received by corporations), a capital gain dividend (as defined in section 852(b)(3)) received from a regulated investment company shall not be considered as a dividend.
Amended 1964, 1986, 2003
- 2003 Pub. L. 108-27 Pub. L. 108–27, § 302(c)(1), inserted “section 1(h)(11) (relating to maximum rate of tax on dividends) and” after “For purposes of”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 612(b)(6)(A), which directed that “section 116 (relating to an exclusion for dividends received by individuals), and” be struck out, was executed by striking out “section 116 (relating to an exclusion for dividends received by individuals) and” before “section 243” as the probable intent of Congress.
- 1964 Pub. L. 88-272 Pub. L. 88–272, § 201(d)(8), struck out “section 34(a) (relating to credit for dividends received by individuals),” before “section 116” and the comma before “and”.
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(b) Other dividends
Amended 1964, 1980, 1981, 1984, 2003, 2004, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(2), redesignated pars. (3) to (5) as (2) to (4), respectively, and struck out former par. (2). Prior to amendment, text read as follows: “The amount of any distribution by a regulated investment company which may be taken into account as qualified dividend income for purposes of section 1(h)(11) and as dividends for purposes of the deduction under section 243 shall not exceed the amount so designated by the company in a written notice to its shareholders mailed not later than 60 days after the close of its taxable year.”
- 2004 Pub. L. 108-311 Pub. L. 108–311, § 402(a)(5)(D), amended heading and text of par. (5) generally. Prior to amendment, text read as follows: “For purposes of paragraph (1)(B), an amount shall be treated as a dividend only if the amount is qualified dividend income (within the meaning of section 1(h)(11)(B)).”
- 2003 Pub. L. 108-27 Pub. L. 108–27, § 302(c)(5), added par. (5).
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 16(a), repealed amendments made by Pub. L. 97–34, § 302(c). See 1981 Amendment note below.
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 302(c)(4), (d)(1), provided for general amendment of subsec. (b) so as to include provisions relating to taxable interest described in section 128 of this title, applicable to taxable years beginning after Dec. 31, 1984. Section 16(a) of Pub. L. 98–369, repealed section 302(c) of Pub. L. 97–34, and provided that this title shall be applied and administered as if section 302(c), and the amendments made by section 302(c), had not been enacted.
- 1980 Pub. L. 96-223 Pub. L. 96–223, § 404(b)(6), temporarily substituted “Other dividends and taxable interest” for “Other dividends” in heading, substituted “Deduction under section 243” for “General rule” in heading for par. (1), struck out “the exclusion under section 116 and” after “in computing” in text of par. (1) following subpar. (B), added par. (2), redesignated former pars. (2) and (3) as (3) and (4), respectively, and, in par. (4) as so redesignated, substituted “116(b)(2)” for “116(b)” and “116(c)(2)” for “116(c)” in subpar. (B) and added subpar. (C).
- 1964 Pub. L. 88-272 Pub. L. 88–272, §§ 201(d)(9), (10), 229(a)(4), substituted “45 days” for “30 days” in par. (2), and struck out “the credit under section 34(a),” before “the exclusion” in par. (1), and “the credit under section 34,” before “the exclusion” in par. (2).
(1) Amount treated as dividend
Amended 1984
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 52(a), increased the required amount of dividends by substituting provisions directing that in any case in which (i) a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies), and (ii) such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend, then, in computing any deduction under section 243, there shall be taken into account only that portion of such dividend thus designated by the regulated investment company, that if the aggregate dividends received by a regulated investment company during any taxable year are less than 95 percent of its gross income, then, in computing the exclusion under section 116, similar rules applied, and that the aggregate amount which may be designated thus dividends shall not exceed the aggregate dividends received by the company for the taxable year for provisions which had directed that in the case of a dividend received from a regulated investment company (other than a dividend to which subsection (a) applied) (A) if such investment company met the requirements of section 852(a) for the taxable year during which it paid such dividend; and (B) the aggregate dividends received by such company during such taxable year were less than 75 percent of its gross income, then, in computing the exclusion under section 116 and the deduction under section 243, there was taken into account only that portion of the dividend which bore the same ratio to the amount of such dividend as the aggregate dividends received by such company during such taxable year to its gross income for such taxable year.
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(A) Deduction under section 243 In any case in which—
(i) a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies), and
(ii) such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend,
then, in computing any deduction under section 243, there shall be taken into account only that portion of such dividend reported by the regulated investment company as eligible for such deduction in written statements furnished to its shareholders and such dividend shall be treated as received from a corporation which is not a 20-percent owned corporation.
Amended 1987, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(1)(A), in concluding provisions, substituted “reported by the regulated investment company as eligible for such deduction in written statements furnished to its shareholders” for “designated under this subparagraph by the regulated investment company”.
- 1987 Pub. L. 100-203 Pub. L. 100–203 inserted “and such dividend shall be treated as received from a corporation which is not a 20-percent owned corporation” before period at end.
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(B) Maximum rate under section 1(h)
Amended 1986, 2003, 2004
- 2004 Pub. L. 108-311 Pub. L. 108–311, § 402(a)(5)(A)(i), struck out cls. (iii) and (iv) which related to dividends from real estate investment trusts and dividends from qualified foreign corporations, respectively.
- 2003 Pub. L. 108-27 Pub. L. 108–27, § 302(c)(2), added subpar. (B). Former subpar. (B) redesignated (C).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 612(b)(6)(B)(i), (ii), redesignated subpar. (C) as (B), struck out “or (B)” before “shall not exceed”, and struck out former subpar. (B), exclusion under section 116, which read as follows: “If the aggregate dividends received by a regulated investment company during any taxable year are less than 95 percent of its gross income, then, in computing the exclusion under section 116, rules similar to the rules of subparagraph (A) shall apply.”
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(i) In general In any case in which—
Amended 2004, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(1)(B), in concluding provisions, substituted “reported by the regulated investment company as qualified dividend income in written statements furnished to its shareholders” for “designated by the regulated investment company”.
- 2004 Pub. L. 108-311 Pub. L. 108–311, § 402(a)(5)(A)(ii), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “If the aggregate dividends received by a regulated investment company during any taxable year are less than 95 percent of its gross income, then, in computing the maximum rate under section 1(h)(11), rules similar to the rules of subparagraph (A) shall apply.”
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(I) a dividend is received from a regulated investment company (other than a dividend to which subsection (a) applies),
(II) such investment company meets the requirements of section 852(a) for the taxable year during which it paid such dividend, and
(III) the qualified dividend income of such investment company for such taxable year is less than 95 percent of its gross income,
then, in computing qualified dividend income, there shall be taken into account only that portion of such dividend reported by the regulated investment company as qualified dividend income in written statements furnished to its shareholders.
(ii) Gross income For purposes of clause (i), in the case of 1 or more sales or other dispositions of stock or securities, the term “gross income” includes only the excess of—
(I) the net short-term capital gain from such sales or dispositions, over
(II) the net long-term capital loss from such sales or dispositions.
(C) Limitations
Amended 1986, 2003, 2004
- 2004 Pub. L. 108-311 Pub. L. 108–311, § 402(a)(5)(B), amended heading and text of subpar. (C) generally. Prior to amendment, text read as follows: “The aggregate amount which may be designated as dividends under subparagraph (A) or (B) shall not exceed the aggregate dividends received by the company for the taxable year.”
- 2003 Pub. L. 108-27 Pub. L. 108–27, § 302(c)(2), (3), redesignated subpar. (B) as (C) and substituted “subparagraph (A) or (B)” for “subparagraph (A)”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 612(b)(6)(B)(i), (ii), redesignated subpar. (C) as (B), struck out “or (B)” before “shall not exceed”, and struck out former subpar. (B), exclusion under section 116, which read as follows: “If the aggregate dividends received by a regulated investment company during any taxable year are less than 95 percent of its gross income, then, in computing the exclusion under section 116, rules similar to the rules of subparagraph (A) shall apply.”
(i) Subparagraph (a) The aggregate amount which may be reported as dividends under subparagraph (A) shall not exceed the aggregate dividends received by the company for the taxable year.
Amended 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(1)(C), substituted “reported” for “designated”.
(ii) Subparagraph (b) The aggregate amount which may be reported as qualified dividend income under subparagraph (B) shall not exceed the sum of—
Amended 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(1)(D), substituted “reported” for “designated” in introductory provisions.
(I) the qualified dividend income of the company for the taxable year, and
(II) the amount of any earnings and profits which were distributed by the company for such taxable year and accumulated in a taxable year with respect to which this part did not apply.
(2) Aggregate dividends For purposes of this subsection—
Amended 1986, 2003, 2004, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(2), redesignated pars. (3) to (5) as (2) to (4), respectively, and struck out former par. (2). Prior to amendment, text read as follows: “The amount of any distribution by a regulated investment company which may be taken into account as qualified dividend income for purposes of section 1(h)(11) and as dividends for purposes of the deduction under section 243 shall not exceed the amount so designated by the company in a written notice to its shareholders mailed not later than 60 days after the close of its taxable year.”
- 2004 Pub. L. 108-311 Pub. L. 108–311, § 402(a)(5)(C), substituted “as qualified dividend income for purposes of section 1(h)(11) and as dividends for purposes of” for “as a dividend for purposes of the maximum rate under section 1(h)(11) and”.
- 2003 Pub. L. 108-27 Pub. L. 108–27, § 302(c)(4), inserted “the maximum rate under section 1(h)(11) and” after “for purposes of”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 655(a)(4), substituted “60 days” for “45 days”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 612(b)(6)(B)(iii), struck out “the exclusion under section 116 and” before “the deduction under section 243”.
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(A) In general In computing the amount of aggregate dividends received, there shall only be taken into account dividends received from domestic corporations.
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(B) Dividends For purposes of subparagraph (A), the term “dividend” shall not include any distribution from—
(i) a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers’ cooperative associations), or
(ii) a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following).
(C) Limitations on dividends from regulated investment companies In determining the amount of any dividend for purposes of this paragraph, a dividend received from a regulated investment company shall be subject to the limitations prescribed in this section.
(3) Special rule for computing deduction under section 243 For purposes of subparagraph (A) of paragraph (1), an amount shall be treated as a dividend for the purpose of paragraph (1) only if a deduction would have been allowable under section 243 to the regulated investment company determined—
Amended 1988, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(2), redesignated pars. (3) to (5) as (2) to (4), respectively, and struck out former par. (2). Prior to amendment, text read as follows: “The amount of any distribution by a regulated investment company which may be taken into account as qualified dividend income for purposes of section 1(h)(11) and as dividends for purposes of the deduction under section 243 shall not exceed the amount so designated by the company in a written notice to its shareholders mailed not later than 60 days after the close of its taxable year.”
- 1988 Pub. L. 100-647 Pub. L. 100–647 substituted “Aggregate dividends” for “Definitions” in heading and amended text generally, substituting subpars. (A) to (C) for former subpars. (A) and (B).
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(A) as if section 243 applied to dividends received by a regulated investment company,
Amended 1984
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 52(c), substituted provisions directing that in the case of 1 or more sales or other dispositions of stock and securities, the term “gross income” include only the excess of (i) the net short-term capital gain from such sales or dispositions, over (ii) the net long-term capital loss from such sales or dispositions for provisions which had directed that the term “gross income” not include gain from the sale or other disposition of stock or securities.
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(B) after the application of section 246 (but without regard to subsection (b) thereof), and
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 612(b)(6)(B)(iv), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “The term ‘aggregate dividends received’ includes only dividends received from domestic corporations other than dividends described in section 116(b) (relating to dividends excluded from gross income). In determining the amount of any dividend for purposes of this subparagraph, the rules provided in section 116(c) (relating to certain distributions) shall apply.”
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(C) after the application of section 246A.
(4) Qualified dividend income For purposes of this subsection, the term “qualified dividend income” has the meaning given such term by section 1(h)(11)(B).
Amended 1984, 2010
- 2010 Pub. L. 111-325 Pub. L. 111–325, § 301(e)(2), redesignated pars. (3) to (5) as (2) to (4), respectively, and struck out former par. (2). Prior to amendment, text read as follows: “The amount of any distribution by a regulated investment company which may be taken into account as qualified dividend income for purposes of section 1(h)(11) and as dividends for purposes of the deduction under section 243 shall not exceed the amount so designated by the company in a written notice to its shareholders mailed not later than 60 days after the close of its taxable year.”
- 1984 Pub. L. 98-369 Pub. L. 98–369, § 52(b), added par. (4).