I
103D CONGRESS
1ST SESSION
H. R. 948
To amend the Internal Revenue Code of 1986 to allow a deduction for
dividends paid by domestic corporations, to reduce the tax on capital
gains from assets held for more than 3 years, and to restore the invest-
ment tax credit for certain property.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 17, 1993
Mr. REGULA 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 a
deduction for dividends paid by domestic corporations,
to reduce the tax on capital gains from assets held for
more than 3 years, and to restore the investment tax
credit for certain property.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. ALLOWANCE OF DEDUCTION FOR DIVIDENDS
PAID BY DOMESTIC CORPORATIONS.
(a) IN GENERAL.—Section 243 of the Internal Reve-
nue Code of 1986 (relating to dividends received by cor-
porations) is amended to read as follows:
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‘‘SEC. 243. DIVIDENDS PAID BY DOMESTIC CORPORATIONS.
‘‘(a) GENERAL RULE.—In the case of a domestic cor-
poration 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 de-
fined 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.’’
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(b) REPEAL OF DEDUCTIONS FOR DIVIDENDS RE-
CEIVED FROM DOMESTIC CORPORATIONS AND RULES RE-
LATING THERETO; REPEAL OF DEDUCTION FOR DIVI-
DENDS 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 utili-
ties) of such Code are hereby repealed.
(c) CONFORMING AMENDMENTS.—
(1) DIVIDENDS RECEIVED FROM CERTAIN FOR-
EIGN CORPORATIONS.—
(A) TRANSFER OF PROVISION SPECIFYING
DEDUCTIBLE
PERCENTAGE
OF
DIVIDEND
RE-
CEIVED.—
(i) 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 ‘‘the applica-
ble percentage determined under para-
graph (12)’’.
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(ii) Subsection (a) of section 245 of
such Code is amended by adding at the
end thereof the following new paragraph:
‘‘(12) APPLICABLE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the applicable percentage is—
‘‘(i) 100 percent in the case of divi-
dends received by a small business invest-
ment company operating under the Small
Business Investment Act of 1958 (15
U.S.C. 661 and following),
‘‘(ii) 80 percent in the case of divi-
dends not described in clause (i) from a
20-percent owned corporation, and
‘‘(iii) 70 percent in the case of any
other dividends.
‘‘(B) 20-PERCENT OWNED CORPORATION.—
For purposes of subparagraph (A), the term
‘20-percent owned corporation’ means any cor-
poration if 20 percent or more of the stock in
such corporation (by vote and value) is owned
by the taxpayer. For purposes of the preceding
sentence, stock described in section 1504(a)
shall not be taken into account.’’
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(iii) Subparagraph (B) of section
245(c)(1) of such Code is amended by
striking ‘‘section 243(c)(2)’’ and inserting
‘‘subsection (a)(12)(B)’’.
(B) TRANSFER OF LIMITATION ON AGGRE-
GATE
AMOUNT
OF
DIVIDENDS
RECEIVED
DE-
DUCTION, EXCLUSION OF CERTAIN DIVIDENDS,
ETC.—Section 245 of such Code (relating to
dividends received from certain foreign corpora-
tions) is amended by adding at the end the fol-
lowing 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 the percentage determined
under subparagraph (C) of the taxable income
computed without regard to—
‘‘(i) the deductions allowed by section
172,
‘‘(ii) any adjustment under section
1059, and