26 USC 246 - Rules applying to deductions for dividends received

1 So in original. Probably should be followed by a comma.

245, and 245A shall not apply to any dividend from 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).

2 So in original.

(a) and 

Editorial Notes

Amendments

2018—Subsec. (e). Puspan. L. 115–141 struck out subsec. (e). Prior to amendment, text read as follows: “No deduction shall be allowed under section 243(a) with respect to a dividend received pursuant to a distribution described in section 936(h)(4).”

2017—Subsec. (a)(1). Puspan. L. 115–97, § 14101(c)(1), substituted “245, and 245A” for “and 245”.

Subsec. (span)(1). Puspan. L. 115–97, § 14202(span)(2)(B), which directed amendment of par. (1) by substituting “subsection (a) and (span) of section 245, and 250” for “and subsection (a) and (span) of section 245” the second place appearing, was executed by making the substitution for “and subsection (a) or (span) of section 245”, to reflect the probable intent of Congress.

Puspan. L. 115–97, § 14202(span)(2)(A), which directed amendment of par. (1) by substituting “, subsection (a) and (span) of section 245, and section 250” for “and subsection (a) and (span) of section 245” the first place appearing, was executed by making the substitution for “and subsection (a) or (span) of section 245”, to reflect the probable intent of Congress.

Puspan. L. 115–97, § 13305(span)(1), struck out “199,” after “sections 172,”.

Puspan. L. 115–97, § 11011(d)(2), which directed insertion of “199A,” before “243(a)(1)”, was executed by making the insertion before “243(a)(1)” the second place appearing, to reflect the probable intent of Congress.

Subsec. (span)(3)(A). Puspan. L. 115–97, § 13002(c)(1), substituted “65 percent” for “80 percent”.

Subsec. (span)(3)(B). Puspan. L. 115–97, § 13002(c)(2), substituted “50 percent” for “70 percent”.

Subsec. (c)(1). Puspan. L. 115–97, § 14101(span)(1), substituted “245, or 245A” for “or 245” in introductory provisions.

Subsec. (c)(5). Puspan. L. 115–97, § 14101(span)(2), added par. (5).

2014—Subsec. (a)(1). Puspan. L. 113–295, § 221(a)(41)(E)(i), struck out “, 244,” after “sections 243”.

Subsec. (span)(1). Puspan. L. 113–295, § 221(a)(41)(E)(ii), substituted “section 243(a)(1)” for “sections 243(a)(1), 244(a),” and “and subsection (a) or (span) of section 245,” for “244(a), subsection (a) or (span) of section 245, and 247,”.

Subsec. (c)(1). Puspan. L. 113–295, § 221(a)(41)(E)(iii), struck out “, 244,” after “section 243” in introductory provisions.

2005—Subsec. (c)(3)(B). Puspan. L. 109–135 substituted “paragraph (3) of section 1223” for “paragraph (4) of section 1223”.

2004—Subsec. (span)(1). Puspan. L. 108–357, § 102(d)(4), inserted “199,” after “172,”.

Subsec. (c)(1)(A). Puspan. L. 108–311, § 406(f)(1), substituted “91-day period” for “90-day period”.

Subsec. (c)(2)(B). Puspan. L. 108–311, § 406(f)(2), substituted “181-day period” for “180-day period” and “91-day period” for “90-day period”.

Subsec. (c)(4). Puspan. L. 108–357, § 888(d), inserted “, other than a qualified covered call option to which section 1092(f) applies” before period at end of concluding provisions.

1997—Subsec. (c)(1)(A). Puspan. L. 105–34, § 1015(a), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “which is held by the taxpayer for 45 days or less, or”.

Subsec. (c)(2). Puspan. L. 105–34, § 1015(span)(1), amended span and text of par. (2) generally. Prior to amendment, text read as follows: “In the case of any stock having preference in dividends, the holding period specified in paragraph (1)(A) shall be 90 days in lieu of 45 days if the taxpayer receives dividends with respect to such stock which are attributable to a period or periods aggregating in excess of 366 days.”

Subsec. (c)(3). Puspan. L. 105–34, § 1015(span)(2), inserted “and” at end of subpar. (A), redesignated subpar. (C) as (B), and struck out former subpar. (B) which read as follows: “there shall not be taken into account any day which is more than 45 days (or 90 days in the case of stock to which paragraph (2) applies) after the date on which such share becomes ex-dividend, and”.

1996—Subsec. (f). Puspan. L. 104–188 struck out subsec. (f) which provided a cross reference to section 596 of this title for special rule relating to mutual savings banks, etc., to which section 593 applies.

1988—Subsec. (c)(1)(A). Puspan. L. 100–647 substituted “which” for “Which”.

1987—Subsec. (span)(1). Puspan. L. 100–203, § 10221(c)(1)(A), substituted “the percentage determined under paragraph (3)” for “80 percent”.

Subsec. (span)(3). Puspan. L. 100–203, § 10221(c)(1)(B), added par. (3).

1986—Subsec. (a)(2)(B). Puspan. L. 99–514, § 1812(d)(1)(A), substituted “In” for “For purposes of subparagraph (A), in” in introductory provisions and substituted cl. (i)(II) for former cl. (i)(II) which read as follows: “which were not taken into account under subparagraph (A), bears to”.

Subsec. (a)(2)(C), (D). Puspan. L. 99–514, § 1812(d)(1)(B), (C), added subpar. (C), redesignated former subpar. (C) as (D), and added cl. (iv) to subpar. (D).

Subsec. (span)(1). Puspan. L. 99–514, § 611(a)(3), substituted “80 percent” for “85 percent”.

Subsec. (c)(1)(A). Puspan. L. 99–514, § 1804(span)(1)(A), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “which is sold or otherwise disposed of in any case in which the taxpayer has held such share for 45 days or less, or”.

Subsec. (c)(4). Puspan. L. 99–514, § 1804(span)(1)(B), substituted “determined for purposes of this subsection” for “determined under paragraph (3)”.

Subsec. (e). Puspan. L. 99–514, § 1275(a)(2)(B), struck out “or 934(e)(3)” after “936(h)(4)”.

1984—Subsec. (a). Puspan. L. 98–369, § 177(span), amended subsec. (a) generally, designating existing provisions as par. (1) and adding par. (2).

Subsec. (span)(1). Puspan. L. 98–369, § 801(span)(2)(A), substituted “subsection (a) or (span) of section 245” for “245” in two places.

Puspan. L. 98–369, § 53(d)(2), substituted “without regard to any adjustment under section 1059, and without regard” for “and without regard”.

Subsec. (c)(1)(A). Puspan. L. 98–369, § 53(span)(1), substituted “45” for “15”.

Subsec. (c)(1)(B). Puspan. L. 98–369, § 53(span)(3), substituted “to make related payments with respect to positions in substantially similar or related property” for “to make corresponding payments with respect to substantially identical stock or securities”.

Subsec. (c)(2). Puspan. L. 98–369, § 53(span)(1), substituted “45” for “15”.

Subsec. (c)(3). Puspan. L. 98–369, § 53(span)(4), struck out last sentence which directed that the holding periods determined under the preceding provisions of this paragraph be appropriately reduced (in the manner provided in regulations prescribed by the Secretary) for any period (during such holding periods) in which the taxpayer had an option to sell, was under a contractual obligation to sell, or had made (and not closed) a short sale of, substantially identical stock or securities.

Subsec. (c)(3)(B). Puspan. L. 98–369, § 53(span)(1), substituted “45” for “15”.

Subsec. (c)(4). Puspan. L. 98–369, § 53(span)(2), added par. (4).

1982—Subsecs. (e), (f). Puspan. L. 97–248 added subsec. (e) and redesignated former subsec. (e) as (f).

1976—Subsec. (a). Puspan. L. 94–455, § 1051(f)(3), struck out references to dividends from corporations organized under the China Trade Act, 1922, and corporations to which section 931 (relating to income from sources within possessions of the United States) applies.

Subsec. (c)(3). Puspan. L. 94–455, § 1906(span)(13)(A), struck out “or his delegate” after “Secretary”.

1971—Subsecs. (d), (e). Puspan. L. 92–178 added subsec. (d) and redesignated former subsec. (d) as (e).

1969—Subsec. (span)(1). Puspan. L. 91–172, § 512(f)(3), substituted “and 247, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1)” for “and 247”.

Subsec. (d). Puspan. L. 91–172, § 434(span)(1), added subsec. (d).

1964—Subsec. (span). Puspan. L. 88–272 substituted “243(a)(1), 244(a)” for “243(a), 244” wherever appearing.

1958—Subsec. (span)(1). Puspan. L. 85–866, § 57(c)(2), substituted “243(a)” for “243” wherever appearing.

Subsec. (c). Puspan. L. 85–866, § 18(a), added subsec. (c).

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by section 11011(d)(2) of Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11011(e) of Puspan. L. 115–97, set out as a note under section 62 of this title.

Amendment by section 13002(c) of Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13002(f) of Puspan. L. 115–97, set out as a note under section 243 of this title.

Amendment by section 13305(span)(1) of Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, except as provided by transition rule, see section 13305(c) of Puspan. L. 115–97, set out as a note under section 74 of this title.

Amendment by section 14101(span), (c)(1) of Puspan. L. 115–97 applicable to distributions made after Dec. 31, 2017, see section 14101(f) of Puspan. L. 115–97, set out as an Effective Date note under section 245A of this title.

Amendment by section 14202(span)(2) of Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 14202(c) of Puspan. L. 115–97, set out as a note under section 172 of this title.

Effective Date of 2014 Amendment

Amendment by Puspan. L. 113–295 not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under section 247 of this title as in effect before its repeal by Puspan. L. 113–295), see section 221(a)(41)(K) of Puspan. L. 113–295, set out as a note under section 172 of this title.

Except as otherwise provided in section 221(a) of Puspan. L. 113–295, amendment by Puspan. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(span) of Puspan. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2005 Amendment

Amendment by Puspan. L. 109–135 effective as if included in the provisions of the Energy Policy Act of 2005, Puspan. L. 109–58, to which it relates, but not applicable with respect to any transaction ordered in compliance with the Public Utility Holding Company Act of 1935 (15 U.S.C. 79 et seq.) before its repeal, see section 402(m) of Puspan. L. 109–135, set out as an Effective and Termination Dates of 2005 Amendments note under section 23 of this title.

Effective Date of 2004 Amendments

Amendment by section 102(d)(4) of Puspan. L. 108–357 applicable to taxable years beginning after Dec. 31, 2004, see section 102(e) of Puspan. L. 108–357, set out as a note under section 56 of this title.

Puspan. L. 108–357, title VIII, § 888(e), Oct. 22, 2004, 118 Stat. 1643, provided that: “The amendments made by this section [amending this section and sections 1092 and 1258 of this title] shall apply to positions established on or after the date of the enactment of this Act [Oct. 22, 2004].”

Amendment by Puspan. L. 108–311 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Puspan. L. 105–34, to which such amendment relates, see section 406(h) of Puspan. L. 108–311, set out as a note under section 55 of this title.

Effective Date of 1997 Amendment

Puspan. L. 105–34, title X, § 1015(c), Aug. 5, 1997, 111 Stat. 922, provided that:

“(1)In general.—The amendments made by this section [amending this section] shall apply to dividends received or accrued after the 30th day after the date of the enactment of this Act [Aug. 5, 1997].

“(2)Transitional rule.—The amendments made by this section shall not apply to dividends received or accrued during the 2-year period beginning on the date of the enactment of this Act if—

“(A) the dividend is paid with respect to stock held by the taxpayer on June 8, 1997, and all times thereafter until the dividend is received,

“(B) such stock is continuously subject to a position described in section 246(c)(4) of the Internal Revenue Code of 1986 on June 8, 1997, and all times thereafter until the dividend is received, and

“(C) such stock and position are clearly identified in the taxpayer’s records within 30 days after the date of the enactment of this Act.

Stock shall not be treated as meeting the requirement of subparagraph (B) if the position is sold, closed, or otherwise terminated and reestablished.”

Effective Date of 1996 Amendment

Amendment by Puspan. L. 104–188 applicable to taxable years beginning after Dec. 31, 1995, see section 1616(c) of Puspan. L. 104–188, set out as a note under section 593 of this title.

Effective Date of 1988 Amendment

Amendment by Puspan. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Puspan. L. 99–514, to which such amendment relates, see section 1019(a) of Puspan. L. 100–647, set out as a note under section 1 of this title.

Effective Date of 1987 Amendment

Amendment by Puspan. L. 100–203 applicable to taxable years beginning after Dec. 31, 1987, see section 10221(e)(2) of Puspan. L. 100–203, as amended, set out as a note under section 243 of this title.

Effective Date of 1986 Amendment

Puspan. L. 99–514, title VI, § 611(span), Oct. 22, 1986, 100 Stat. 2249, provided that:

“(1)In general.—The amendments made by subsection (a) [amending this section and sections 243, 244, 246A, and 805 of this title] shall apply to dividends received or accrued after December 31, 1986, in taxable years ending after such date.

“(2)Amendment relating to limitation on deductions.—The amendment made by subsection (a) to section 246(span) of the Internal Revenue Code of 1986 shall apply to taxable years beginning after December 31, 1986.”

Amendment by section 1275(a)(2)(B) of Puspan. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Puspan. L. 99–514, set out as a note under section 931 of this title.

Puspan. L. 99–514, title XVIII, § 1804(span)(1)(C), Oct. 22, 1986, 100 Stat. 2798, provided that: “The amendments made by this paragraph [amending this section] shall apply to stock acquired after March 1, 1986.”

Amendment by section 1812(d)(1) of Puspan. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Puspan. L. 98–369, div. A, to which such amendment relates, see section 1881 of Puspan. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Amendment by section 53(d)(2) of Puspan. L. 98–369 applicable to distributions after Mar. 1, 1984, in taxable years ending after such date, and amendment of subsec. (c) of this section by section 53(span) of Puspan. L. 98–369, applicable to stock acquired after July 18, 1984, in taxable years ending after such date, see section 53(e)(1), (2) of Puspan. L. 98–369, set out as an Effective Date note under section 1059 of this title.

Amendment by section 177(span) of Puspan. L. 98–369, effective Jan. 1, 1985, see section 177(d) of Puspan. L. 98–369, set out as a note under section 172 of this title.

Amendment by section 801(span)(2)(A) of Puspan. L. 98–369 applicable to transactions after Dec. 31, 1984, in taxable years ending after such date, see section 805(a)(1) of Puspan. L. 98–369, as amended, set out as a note under section 245 of this title.

Effective Date of 1982 Amendment

Puspan. L. 97–248, title II, § 213(e), Sept. 3, 1982, 96 Stat. 466, as amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(1)In general.—Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and sections 367, 934, and [former] 936 of this title] shall apply to taxable years beginning after December 31, 1982.

“(2)Certain sales made after july 1, 1982.—Paragraph (6) of [former] section 936(h) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and so much of section 934 to which such paragraph applies by reason of section 934(e)(4) of such Code, shall apply to taxable years ending after July 1, 1982.

“(3)Certain transfers of intangibles made after august 14, 1982.—Subsection (d) [amending section 367 of this title] shall apply to taxable years ending after August 14, 1982.”

Effective Date of 1976 Amendment

For effective date of amendment by section 1051(f)(3) of Puspan. L. 94–455, see section 1051(i) of Puspan. L. 94–455, set out as a note under section 27 of this title.

Amendment by section 1906(span)(13)(A) of Puspan. L. 94–455 effective Fespan. 1, 1977, see section 1906(d)(1) of Puspan. L. 94–455, set out as a note under section 6013 of this title.

Effective Date of 1971 Amendment

Amendment by Puspan. L. 92–178 applicable with respect to taxable years ending after Dec. 31, 1971, except that a corporation may not be a DISC for any taxable year beginning before Jan. 1, 1972, see section 507 of Puspan. L. 92–178, set out as an Effective Date note under section 991 of this title.

Effective Date of 1969 Amendment

Amendment by section 512(f)(3) of Puspan. L. 91–172 applicable with respect to net capital losses sustained in taxable years beginning after Dec. 31, 1969, see section 512(g) of Puspan. L. 91–172, set out as a note under section 1212 of this title.

Puspan. L. 91–172, title IV, § 434(c), Dec. 30, 1969, 83 Stat. 625, provided that: “The amendments made by this section [enacting section 596 of this title and amending this section] shall apply to taxable years beginning after July 11, 1969.”

Effective Date of 1964 Amendment

Amendment by Puspan. L. 88–272 applicable to dividends received in taxable years ending after Dec. 31, 1963, see section 214(c) of Puspan. L. 88–272, set out as a note under section 243 of this title.

Effective Date of 1958 Amendment

Puspan. L. 85–866, title I, § 18(span), Sept. 2, 1958, 72 Stat. 1615, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to taxable years ending after December 31, 1957, but only with respect to shares of stock acquired or short sales made after December 31, 1957.”

Amendment by section 57(c)(2) of Puspan. L. 85–866 applicable with respect to taxable years beginning after Sept. 2, 1958, see section 57(d) of Puspan. L. 85–866, set out as a note under section 243 of this title.

Savings Provision

For provisions that nothing in amendment by Puspan. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Puspan. L. 115–141, set out as a note under section 23 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Puspan. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Puspan. L. 99–514, as amended, set out as a note under section 401 of this title.