I 
108TH CONGRESS 
1ST SESSION 
H. R. 225
To amend the Internal Revenue Code of 1986 to allow individuals to exclude 
dividend income. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 7, 2003
Mr. WILSON of South Carolina 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 allow 
individuals to exclude dividend income.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Dividend Taxation 
Elimination Act of 2003’’. 
SEC. 2. EXEMPTION OF DIVIDEND INCOME FROM TAX. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
amounts specifically excluded from gross income) is
amended by inserting after section 115 the following new 
section: 
‘‘SEC. 116. EXCLUSION OF DIVIDENDS RECEIVED BY INDI-
VIDUALS. 
‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in-
come does not include dividends which are otherwise in-
cludible in gross income and which are received during the 
taxable year by an individual. 
‘‘(b) LIMITATION BEFORE 2007.—In the case of a 
taxable year beginning before January 1, 2007, the aggre-
gate amount excluded under subsection (a) for any taxable 
year shall not exceed—
‘‘(1) $25,000 in the case of taxable years begin-
ning during 2003, 
‘‘(2) $50,000 in the case of taxable years begin-
ning during 2004, 
‘‘(3) $75,000 in the case of taxable years begin-
ning during 2005, and 
‘‘(4) $100,000 in the case of taxable years be-
ginning during 2006. 
In the case of a joint return, the preceding sentence shall 
be applied by doubling each amount contained therein. 
‘‘(c) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) EXCLUSION NOT TO APPLY TO CAPITAL 
GAIN
DIVIDENDS
FROM
REGULATED
INVESTMENT 
COMPANIES
AND
REAL
ESTATE
INVESTMENT 
TRUSTS.—
‘‘For treatment of capital gain dividends, see sec-
tions 854(a) and 857(c).
‘‘(2) CERTAIN
NONRESIDENT
ALIENS
INELI-
GIBLE
FOR
EXCLUSION.—In the case of a non-
resident alien individual, subsection (a) shall apply 
only in determining the taxes imposed for the tax-
able year pursuant to sections 871(b)(1) and 877(b). 
‘‘(3) DIVIDENDS FROM EMPLOYEE STOCK OWN-
ERSHIP PLANS.—Subsection (a) shall not apply to 
any dividend described in section 404(k). 
‘‘(4) CERTAIN
DIVIDENDS
EXCLUDED.—Sub-
section (a) shall not apply to any dividend from a 
corporation which for the taxable year of the cor-
poration in which the distribution is made is a cor-
poration exempt from tax under section 521 (relat-
ing to farmers’ cooperative associations).’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 32(i)(2) of 
such Code is amended by inserting ‘‘(determined 
without regard to section 116)’’ before the comma. 
(2) Subparagraph (B) of section 86(b)(2) of 
such Code is amended to read as follows:
‘‘(B) increased by the sum of—
‘‘(i) the amount of interest received or 
accrued by the taxpayer during the taxable 
year which is exempt from tax, and 
‘‘(ii) the amount of dividends received 
during the taxable year which are excluded 
from gross income under section 116.’’. 
(3) Subsection (d) of section 135 of such Code 
is amended by redesignating paragraph (4) as para-
graph (5) and by inserting after paragraph (3) the 
following new paragraph: 
‘‘(4) COORDINATION WITH SECTION 116.—This 
section shall be applied before section 116.’’. 
(4) Subsection (c) of section 584 of such Code 
is amended by adding at the end the following new 
flush sentence: 
‘‘The proportionate share of each participant in the 
amount of dividends received by the common trust fund 
and to which section 116 applies shall be considered for 
purposes of such section as having been received by such 
participant.’’. 
(5) Subsection (a) of section 643 of such Code 
is amended by redesignating paragraph (7) as para-
graph (8) and by inserting after paragraph (6) the 
following new paragraph: