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108TH CONGRESS 
1ST SESSION 
H. R. 50
To amend the Internal Revenue Code of 1986 to eliminate the double taxation 
of dividends. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 7, 2003
Mr. COX (for himself, Mrs. BIGGERT, Mr. BROWN of South Carolina, Mr. 
CANTOR, Mrs. JO ANN DAVIS of Virginia, Mr. DEMINT, Mr. DUNCAN, 
Mr. ENGLISH, Mr. FLAKE, Mr. GALLEGLY, Mr. HERGER, Mr. HYDE, Mr. 
ISTOOK, Mr. KOLBE, Mr. LATHAM, Mr. NETHERCUTT, Mr. OTTER, Mr. 
PAUL, Mr. PENCE, Mr. PETRI, Mr. PLATTS, Mr. SESSIONS, Mr. SHAD-
EGG, Mr. SHUSTER, Mr. SMITH
of Michigan, Mr. SOUDER, Mr. 
SWEENEY, Mr. TIAHRT, Mr. WELDON of Florida, and 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 eliminate 
the double taxation of dividends.
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 ‘‘Investor Protection, 
Market Stabilization, and Tax Fairness Restoration Act 
of 2003’’.
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SEC. 2. FINDINGS. 
Congress finds that: 
(1) Corporate earnings paid out as dividends 
are taxed once at the full corporate rate, and again 
at the full individual rate, leading to an effective 
rate that can be in excess of 60%. 
(2) This confiscatory taxation of dividends has 
contributed to a steady diminution of dividend pay-
out ratios and the virtual elimination of dividends as 
the primary method of rewarding equity investors 
for risk. 
(3) When taxation makes dividend distributions 
uneconomical, investors are forced to look at sale or 
collateralization of stock as essentially the only ways 
of achieving an adequate rate of return on invest-
ment. 
(4) As a result, even companies with healthy 
earnings are unable to protect their investors from 
loss during a stock market downturn. 
SEC. 3. PURPOSE. 
The purpose of this Act is to protect taxpaying inves-
tors in America’s equity markets, promote a greater cor-
relation between earnings and equity prices, and encour-
age economic growth by eliminating the unfair double tax-
ation of dividends.
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SEC. 4. ELIMINATION OF DOUBLE TAX ON DIVIDENDS. 
(a) DIVIDENDS RECEIVED BY INDIVIDUALS.—
(1) CREDIT FOR TAX PAID BY DISTRIBUTING 
CORPORATION.—Part IV of subchapter A of chapter 
1 of the Internal Revenue Code of 1986 is amended 
by adding at the end thereof the following new sub-
part: 
‘‘Subpart H—Individual Shareholder Credit
‘‘Sec. 54. Allowance of shareholder credit. 
‘‘Sec. 54A. Determination of shareholder credit. 
‘‘Sec. 54B. Inclusion of shareholder credit.
‘‘SEC. 54. ALLOWANCE OF SHAREHOLDER CREDIT. 
‘‘(a) GENERAL RULE.—In the case of a taxpayer 
other than a corporation, there shall be allowed as a credit 
against the tax imposed by this chapter for the taxable 
year an amount equal to the shareholder credits deter-
mined with respect to dividends from domestic corpora-
tions received by the taxpayer during the taxable year. 
‘‘(b) LIMITATION.—The amount allowed as a credit 
under subsection (a) for any taxable year shall not exceed 
the sum of—
‘‘(1) the regular tax liability of the taxpayer for 
the taxable year reduced by the sum of the credits 
allowable under this part (other than subpart C), 
and 
‘‘(2) the minimum tax imposed by section 55.
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‘‘(c) NONRESIDENT ALIENS.—No credit shall be al-
lowed under this section to any nonresident alien with re-
spect to any dividend unless such dividend is taxable under 
section 871(b) (relating to income effectively connected 
with United States business). 
‘‘SEC. 54A. DETERMINATION OF SHAREHOLDER CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of this subpart, 
the shareholder credit with respect to any dividend paid 
by a domestic corporation is an amount which bears the 
same ratio to such corporation’s post-2002 Federal income 
taxes as—
‘‘(1) the amount of such dividend (determined 
without regard to section 54B), bears to 
‘‘(2) such corporation’s post-2002 undistributed 
earnings. 
‘‘(b) POST-2002 FEDERAL INCOME TAXES.—For 
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘post-2002 Fed-
eral income taxes’ means the sum of—
‘‘(A) the Federal income taxes with respect 
to the taxable year of the distributing corpora-
tion in which the dividend is distributed, plus 
‘‘(B) the Federal income taxes with respect 
to prior taxable years of such corporation begin-
ning after December 31, 2002, reduced by the
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amount of shareholder credits determined with 
respect to distributions by such corporation in 
such prior taxable years. 
‘‘(2) FEDERAL
INCOME
TAXES.—The term 
‘Federal income taxes’ means any tax paid by the 
corporation under this chapter. Any shareholder 
credit determined under this section with respect to 
a dividend received by the corporation during any 
taxable year shall be treated as a tax paid by the 
corporation under this chapter for such taxable year. 
‘‘(c) POST-2002 UNDISTRIBUTED EARNINGS.—For 
purposes of this section, the term ‘post-2002 undistributed 
earnings’ means the earnings and profits of the distrib-
uting corporation accumulated in taxable years beginning 
after December 31, 2002, determined—
‘‘(1) as of the close of the taxable year in which 
the dividend is distributed, and 
‘‘(2) without diminution by reason of dividends 
distributed during such taxable year. 
‘‘SEC. 54B. INCLUSION OF SHAREHOLDER CREDIT. 
‘‘In the case of a taxpayer other than a corporation, 
gross income shall include the amount of the shareholder 
credits determined under section 54A with respect to divi-
dends received by such shareholder.’’
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(3) TECHNICAL, CONFORMING
AND
CLERICAL 
AMENDMENTS.—
(A) Section 243 of such Code (relating to 
dividends received by corporations) is amended 
by striking subsections (b) and (c) and by re-
designating subsections (d) and (e) as sub-
sections (b) and (c), respectively. 
(B) Subsection (b) of section 246 of such 
Code (relating to rules applying to deductions 
for dividends received) is amended—
(i) in paragraph (1) by striking 
‘‘243(a)(1), 244(a)’’ each time it appears 
and inserting ‘‘243, 244’’ and by striking 
‘‘the percentage determined under para-
graph (3) of’’, and 
(ii) by striking paragraph (3).
(C)(i) 
Subparagraph 
(A) 
of 
section 
805(a)(4) of such Code (relating to dividends 
received by life insurance companies) is amend-
ed by striking all that follows ‘‘subparagraph 
(B))’’ and inserting a period. 
(ii) Subparagraph (B) of section 805(a)(4) 
of such Code is amended—
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(I) by striking ‘‘243(a)(1), 244(a)’’ 
each place it appears and inserting ‘‘243, 
244’’, 
(II) by striking ‘‘the percentage deter-
mined under section 246(b)(3) of’’, and 
(III) by striking ‘‘(and such limitation 
shall be applied as provided in section 
246(b)(3))’’. 
(iii) Paragraph (4) of section 805(a) of 
such Code is amended by striking subpara-
graphs (C), (D), (E), and (F) and inserting the 
following: 
‘‘(C) DISTRIBUTIONS OUT OF TAX-EXEMPT 
INTEREST.—No deduction shall be allowed by 
reason of this paragraph with respect to any 
dividend to the extent the dividend is a distribu-
tion out of tax-exempt interest.’’
(D) Subparagraph (C) of section 861(a)(2) 
of such Code (relating to income from sources 
within the United States) is amended by strik-
ing ‘‘243(e)’’ and inserting ‘‘243(c)’’. 
(E) 
Subparagraph 
(B) 
of 
section 
1504(c)(2) of such Code (relating to definition 
of includible insurance companies) is amended 
by striking clause (i) and by redesignating
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clauses (ii) and (iii) as clauses (i) and (ii), re-
spectively. 
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to taxable years end-
ing after the date of the enactment of this Act.
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