USC - Dividends received by corporations

View all text of Part VIII [§ 241 - § 250]

§ 243. Dividends received by corporations

(a) General rule

In the case of a corporation, there shall be allowed as a deduction an amount equal to the following percentages of the amount received as dividends from a domestic corporation which is subject to taxation under this chapter:

(1) 50 percent, in the case of dividends other than dividends described in paragraph (2) or (3);

(2) 100 percent, in the case of dividends received by a small business investment company operating under the Small Business Investment Act of 1958 (15 U.S.C. 661 and following); and

(3) 100 percent, in the case of qualifying dividends (as defined in subsection (b)(1)).

(b) Qualifying dividends

(1) In general

For purposes of this section, the term “qualifying dividend” means any dividend received by a corporation—

(A) if at the close of the day on which such dividend is received, such corporation is a member of the same affiliated group as the corporation distributing such dividend, and

(B) if such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group.

(2) Affiliated group

For purposes of this subsection:

(A) In general

(B) Group must be consistent in foreign tax treatment

The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxable year which includes the day on which such dividend is received—

(i) 1 or more members of the affiliated group referred to in paragraph (1)(A) choose to any extent to take the benefits of section 901, and

(ii) 1 or more other members of such group claim to any extent a deduction for taxes otherwise creditable under section 901.

(3) Special rule for groups which include life insurance companies

(A) In general

(B) Effect of election

If an election under this paragraph is in effect with respect to any affiliated group—

(i) part II of subchapter B of chapter 6 (relating to certain controlled corporations) shall be applied with respect to the members of such group without regard to sections 1563(a)(4) and 1563(b)(2)(D), and

(ii) for purposes of this subsection, a distribution by any member of such group which is subject to tax under section 801 shall not be treated as a qualifying dividend if such distribution is out of earnings and profits for a taxable year for which an election under this paragraph is not effective and for which such distributing corporation was not a component member of a controlled group of corporations within the meaning of section 1563 solely by reason of section 1563(b)(2)(D).

(1) In general

(2) 20-percent owned corporation

(d) Special rules for certain distributions

For purposes of subsection (a)—

(1) Any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.) shall not be treated as a dividend.

(2) A dividend received from a regulated investment company shall be subject to the limitations prescribed in section 854.

(3) Any dividend received from 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) shall not be treated as a dividend.

(e) Certain dividends from foreign corporations

(Aug. 16, 1954, ch. 736, 68A Stat. 73; Pub. L. 85–866, title I, § 57(b), Sept. 2, 1958, 72 Stat. 1645; Pub. L. 86–779, §§ 3(a), 10(g), Sept. 14, 1960, 74 Stat. 998, 1009; Pub. L. 88–272, title II, § 214(a), Feb. 26, 1964, 78 Stat. 52; Pub. L. 90–364, title I, § 103(e)(2), June 28, 1968, 82 Stat. 264; Pub. L. 91–172, title V, § 504(c)(1), Dec. 30, 1969, 83 Stat. 633; Pub. L. 94–12, title III, § 304(b), Mar. 29, 1975, 89 Stat. 45; Pub. L. 94–455, title X, §§ 1031(b)(2), 1051(f)(1), (2), title XIX, §§ 1901(a)(34), (b)(1)(J)(ii), (21)(A)(i), 1906(b)(3)(C)(ii), (13)(A), Oct. 4, 1976, 90 Stat. 1622, 1646, 1769, 1791, 1797, 1833, 1834; Pub. L. 97–34, title II, § 232(b)(2), Aug. 13, 1981, 95 Stat. 250; Pub. L. 98–369, div. A, title II, § 211(b)(3), July 18, 1984, 98 Stat. 754; Pub. L. 99–514, title IV, § 411(b)(2)(C)(iv), title VI, § 611(a)(1), Oct. 22, 1986, 100 Stat. 2227, 2249; Pub. L. 100–203, title X, § 10221(a)(1), (b), Dec. 22, 1987, 101 Stat. 1330–408; Pub. L. 100–647, title I, § 1010(f)(4), Nov. 10, 1988, 102 Stat. 3454; Pub. L. 101–508, title XI, § 11814(a), Nov. 5, 1990, 104 Stat. 1388–556; Pub. L. 104–188, title I, § 1702(h)(4), (8), Aug. 20, 1996, 110 Stat. 1873, 1874; Pub. L. 113–295, div. A, title II, § 221(a)(41)(C), (D), Dec. 19, 2014, 128 Stat. 4044; Pub. L. 115–97, title I, § 13002(a), Dec. 22, 2017, 131 Stat. 2100; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(v), (xvii)(II), Mar. 23, 2018, 132 Stat. 1207, 1208.)