Saving and Investment Act of 1993

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Saving and Investment Act of 1993''.

SEC. 2. ALLOWANCE OF DEDUCTION FOR DIVIDENDS PAID BY DOMESTIC 
              CORPORATIONS.

    (a) In General.--Section 243 of the Internal Revenue Code of 1986 
(relating to dividends received by corporations) is amended to read as 
follows:

``SEC. 243. DIVIDENDS PAID BY DOMESTIC CORPORATIONS.

    ``(a) General Rule.--In the case of a domestic corporation which is 
subject to taxation under this chapter, there shall be allowed as a 
deduction for the taxable year an amount equal to the dividends paid by 
such corporation during the taxable year.
    ``(b) Dividends.--For purposes of this section, the term `dividend' 
means any dividend (as defined in section 316) to which section 301 
applies.
    ``(c) Certain Corporations Not Eligible.--No deduction shall be 
allowed under this section with respect to dividends paid by any 
corporation which is--
            ``(1) an S corporation (as defined in section 1361(a)(1));
            ``(2) a regulated investment company (as defined in section 
        851(a));
            ``(3) a real estate investment trust (as defined in section 
        856(a)); or
            ``(4) a personal holding company (as defined in section 
        542).
    ``(d) Special Rules for Certain Distributions of Mutual Savings 
Banks, Etc.--For purposes of this section, 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.''
    (b) Repeal of Deductions for Dividends Received From Domestic 
Corporations and Rules Relating Thereto; Repeal of Deduction for 
Dividends Paid on Certain Preferred Stock of Public Utilities.--
Sections 244 (relating to dividends received on certain preferred 
stock), 246 (relating to rules applying to deductions for dividends 
received), and 247 (relating to dividends paid on certain preferred 
stock of public utilities) of such Code are hereby repealed.
    (c) Conforming Amendments.--
            (1) Dividends received from certain foreign corporations.--
                    (A) Transfer of provision specifying deductible 
                percentage of dividend received.--Paragraph (1) of 
                section 245(a) of such Code (relating generally to 
                dividends received from 10-percent owned foreign 
                corporations) is amended by striking ``the percent 
                (specified in section 243 for the taxable year)'' and 
                inserting in lieu thereof ``85 percent (100 percent in 
                the case of a small business investment company 
                operating under the Small Business Investment Act of 
                1958 (15 U.S.C. 661 et seq.))''.
                    (B) Transfer of limitation on aggregate amount of 
                dividends received deduction, exclusion of certain 
                dividends, etc.--Section 245 of such Code (relating to 
                dividends received from certain foreign corporations) 
                is amended by adding at the end the following new 
                subsections:
    ``(e) Limitation and Special Rules.--
            ``(1) Limitation on aggregate amount of deduction.--
                    ``(A) In general.--Except as provided by 
                subparagraph (B), the aggregate amount of the 
                deductions allowed by subsections (a) and (b) shall not 
                exceed 80 percent of the taxable income computed 
                without regard to--
                            ``(i) the deductions allowed by section 
                        172,
                            ``(ii) any adjustment under section 1059, 
                        and
                            ``(iii) any capital loss carryback to the 
                        taxable year under section 1212(a)(1).
                    ``(B) Effect of net operating loss.--Subparagraph 
                (A) shall not apply for any taxable year for which 
                there is a net operating loss (as determined under 
                section 172).
            ``(2) Exclusion of certain dividends.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) or (b) in respect of any dividend 
                on any share of stock--
                            ``(i) which is sold or otherwise disposed 
                        of in any case in which the taxpayer has held 
                        such share for 45 days or less, or
                            ``(ii) to the extent that the taxpayer is 
                        under an obligation (whether pursuant to a 
                        short sale or otherwise) to make corresponding 
                        payments with respect to positions in 
                        substantially similar or related property.
                    ``(B) 90-day rule in the case of certain preference 
                dividends.--In the case of any stock having preference 
                in dividends, the holding period specified in 
                subparagraph (A)(i) 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.
                    ``(C) Determination of holding periods.--For 
                purposes of this subsection, in determining the period 
                for which the taxpayer has held any share of stock--
                            ``(i) the day of disposition, but not the 
                        day of acquisition, shall be taken into 
                        account,
                            ``(ii) 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 
                        subparagraph (B) applies) after the date on 
                        which such share becomes ex-dividend, and
                            ``(iii) paragraph (4) of section 1223 shall 
                        not apply.
                    ``(D) Holding period reduced for periods where risk 
                of loss diminished.--The holding periods determined 
                under the preceding provisions of this subparagraph 
                shall be appropriately reduced (in the manner provided 
                in regulations prescribed by the Secretary) for any 
                period (during such periods) in which--
                            ``(i) the taxpayer has an option to sell, 
                        is under a contractual obligation to sell, or 
                        has made (and not closed) a short sale of, 
                        substantially identical stock or securities,
                            ``(ii) the taxpayer is the grantor of an 
                        option to buy substantially identical stock or 
                        securities, or
                            ``(iii) under regulations prescribed by the 
                        Secretary, a taxpayer has diminished his risk 
                        of loss by holding 1 or more other positions 
                        with respect to substantially similar or 
                        related property.
                The preceding sentence shall not apply in the case of 
                any qualified covered call (as defined in section 
                1092(c)(4) but without regard to the requirement that 
                gain or loss with respect to the option not be ordinary 
                income or loss).
    ``(f) Cross Reference.--

                                ``For special rule relating to mutual 
savings banks, etc., to which section 593 applies, see section 596.''
            (2) Net operating loss deduction.--Paragraph (6) of section 
        172(d) of such Code is amended to read as follows:
            ``(6) Computation of deduction for dividends received from 
        certain foreign corporations.--The deduction allowed by section 
        245 (relating to dividends received from certain foreign 
        corporations) shall be computed without regard to section 
        245(e)(1).''
            (3) Dividends received deduction reduced where portfolio 
        stock is debt financed.--
                    (A) Subsections (a) and (e) of section 246A of such 
                Code (relating to dividends received deduction reduced 
                where portfolio stock is debt financed) are each 
                amended by striking ``243, 244, or''.
                    (B) Subsection (b) of section 246A of such Code is 
                amended to read as follows:
    ``(b) Section Not to Apply to Dividends for Which 100 Percent 
Dividends Received Deduction Allowable.--Subsection (a) shall not apply 
to dividends received by a small business investment company operating 
under the Small Business Investment Act of 1958.''
            (4) Limitation on dividends received deduction for mutual 
        savings banks, etc.--Section 596 of such Code (relating to 
        limitation on dividends received deduction) is amended by 
        striking ``sections 243, 244, and 245'' and inserting in lieu 
        thereof ``section 245''.
    (d) Clerical Amendments.--The table of sections for part VIII of 
subchapter B of chapter 1 is amended by striking the items relating to 
sections 243, 244, 246, and 247 and inserting after the item relating 
to section 241 the following:

                              ``Sec. 243. Dividends paid by domestic 
                                        corporations.''
    (e) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 1993.

Summary: Saving and Investment Act of 1993 - Amends the Internal Revenue Code to permit an income tax deduction in the amount of dividends paid by domestic corporations, except S corporations, regulated investment companies, real estate investment trusts, and personal holding companies. Repeals the income tax deductions currently permitted in connection with: (1) dividends received by a corporation. (2) dividends received by a corporation on the preferred stock of a public utility. And (3) dividends paid by a public utility on its preferred stock. Increases from 80 percent to 85 percent the deductible percentage of amounts received by a corporation from a qualified ten-percent owned foreign corporation.