I 

108TH CONGRESS 

1ST SESSION H. R. 45

To amend the Internal Revenue Code of 1986 to repeal the double taxation 

of corporate profits. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 7, 2003

Mr. COLLINS introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to repeal 

the double taxation of corporate profits.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. REPEAL OF DOUBLE TAXATION OF CORPORATE 

4 PROFITS. 

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to 

7 amounts specifically excluded from gross income) is 

8 amended by inserting after section 115 the following new 

9 section: 
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1 ‘‘SEC. 116. EXCLUSION OF DIVIDENDS RECEIVED BY INDI2 VIDUALS. 

3 ‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in4 come does not include dividends otherwise includible in 

5 gross income which are received during the taxable year 

6 by an individual. 

7 ‘‘(b) SPECIAL RULES.—For purposes of this sec8 tion—

9 ‘‘(1) CERTAIN DIVIDENDS EXCLUDED.—Sub10 section (a) shall not apply to any dividend from a 

11 corporation which for the taxable year of the cor12 poration in which the distribution is made is a cor13 poration exempt from tax under section 521 (relat14 ing to farmers’ cooperative associations). 

15 ‘‘(2) EXCLUSION NOT TO APPLY TO CAPITAL

16 GAIN DIVIDENDS FROM REGULATED INVESTMENT

17 COMPANIES AND REAL ESTATE INVESTMENT

18 TRUSTS.—

‘‘For treatment of capital gain dividends, see sections 854(a) and 857(c).

19 ‘‘(3) CERTAIN NONRESIDENT ALIENS INELI20 GIBLE FOR EXCLUSION.—In the case of a non21 resident alien individual, subsection (a) shall apply 

22 only in determining the taxes imposed for the tax23 able year pursuant to sections 871(b)(1) and 877(b). 
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1 ‘‘(4) DIVIDENDS FROM EMPLOYEE STOCK OWN2 ERSHIP PLANS.—Subsection (a) shall not apply to 

3 any dividend described in section 404(k).’’. 

4 (b) CONFORMING AMENDMENTS.—

5 (1) Subparagraph (A) of section 32(i)(2) of 

6 such Code is amended by inserting ‘‘(determined 

7 without regard to section 116)’’ before the comma. 

8 (2) Subparagraph (B) of section 86(b)(2) of 

9 such Code is amended to read as follows: 

10 ‘‘(B) increased by the sum of—

11 ‘‘(i) the amount of interest received or 

12 accrued by the taxpayer during the taxable 

13 year which is exempt from tax, and 

14 ‘‘(ii) the amount of dividends received 

15 during the taxable year which are excluded 

16 from gross income under section 116.’’. 

17 (3) Subsection (d) of section 135 of such Code 

18 is amended by redesignating paragraph (4) as para19 graph (5) and by inserting after paragraph (3) the 

20 following new paragraph: 

21 ‘‘(4) COORDINATION WITH SECTION 116.—This 

22 section shall be applied before section 116.’’. 

23 (4) Subsection (c) of section 584 of such Code 

24 is amended by adding at the end the following new 

25 flush sentence: 
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1 ‘‘The proportionate share of each participant in the 

2 amount of dividends received by the common trust fund 

3 and to which section 116 applies shall be considered for 

4 purposes of such section as having been received by such 

5 participant.’’. 

6 (5) Subsection (a) of section 643 of such Code 

7 is amended by redesignating paragraph (7) as para8 graph (8) and by inserting after paragraph (6) the 

9 following new paragraph: 

10 ‘‘(7) DIVIDENDS.—There shall be included the 

11 amount of any dividends excluded from gross income 

12 pursuant to section 116.’’. 

13 (6) Section 854(a) of such Code is amended by 

14 inserting ‘‘section 116 (relating to exclusion of divi15 dends received by individuals) and’’ after ‘‘For pur16 poses of’’. 

17 (7) Section 857(c) of such Code is amended to 

18 read as follows: 

19 ‘‘(c) RESTRICTIONS APPLICABLE TO DIVIDENDS RE20 CEIVED FROM REAL ESTATE INVESTMENT TRUSTS.—

21 ‘‘(1) TREATMENT FOR SECTION 116.—For pur22 poses of section 116 (relating to exclusion of divi23 dends received by individuals), a capital gain divi24 dend (as defined in subsection (b)(3)(C)) received 

25 from a real estate investment trust which meets the 
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1 requirements of this part shall not be considered as 

2 a dividend. 

3 ‘‘(2) TREATMENT FOR SECTION 243.—For pur4 poses of section 243 (relating to deductions for divi5 dends received by corporations), a dividend received 

6 from a real estate investment trust which meets the 

7 requirements of this part shall not be considered as 

8 a dividend.’’. 

9 (8) The table of sections for part III of sub10 chapter B of chapter 1 of such Code is amended by 

11 inserting after the item relating to section 115 the 

12 following new item:

‘‘Sec. 116. Exclusion of dividends received by individuals.’’.

13 (c) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to taxable years beginning after 

15 December 31, 2002.

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