US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 243

Dividends received by corporations

(a)

General rule

In the case of a corporation, there shall be allowed as a deduction an amount equal to the following percentages of the amount received as dividends from a domestic corporation which is subject to taxation under this chapter:
(1)
50 percent, in the case of dividends other than dividends described in paragraph (2) or (3);
(2)
15 U.S.C. 661 100 percent, in the case of dividends received by a small business investment company operating under the Small Business Investment Act of 1958 ( and following); and
(3)
100 percent, in the case of qualifying dividends (as defined in subsection (b)(1)).
(b)

Qualifying dividends

(1)

In general

For purposes of this section, the term “qualifying dividend” means any dividend received by a corporation—
(A)
if at the close of the day on which such dividend is received, such corporation is a member of the same affiliated group as the corporation distributing such dividend, and
(B)
if such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after , and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group.
(2)

Affiliated group

For purposes of this subsection:
(A)

In general

The term “affiliated group” has the meaning given such term by section 1504(a), except that for such purposes sections 1504(b)(2) and 1504(c) shall not apply.

(B)

Group must be consistent in foreign tax treatment

The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxable year which includes the day on which such dividend is received—
(i)
1 or more members of the affiliated group referred to in paragraph (1)(A) choose to any extent to take the benefits of section 901, and
(ii)
1 or more other members of such group claim to any extent a deduction for taxes otherwise creditable under section 901.
(3)

Special rule for groups which include life insurance companies

(A)

In general

In the case of an affiliated group which includes 1 or more insurance companies under section 801, no dividend by any member of such group shall be treated as a qualifying dividend unless an election under this paragraph is in effect for the taxable year in which the dividend is received. The preceding sentence shall not apply in the case of a dividend described in paragraph (1)(B)(ii).

(B)

Effect of election

If an election under this paragraph is in effect with respect to any affiliated group—
(i)
part II of subchapter B of chapter 6 (relating to certain controlled corporations) shall be applied with respect to the members of such group without regard to sections 1563(a)(4) and 1563(b)(2)(D), and
(ii)
for purposes of this subsection, a distribution by any member of such group which is subject to tax under section 801 shall not be treated as a qualifying dividend if such distribution is out of earnings and profits for a taxable year for which an election under this paragraph is not effective and for which such distributing corporation was not a component member of a controlled group of corporations within the meaning of section 1563 solely by reason of section 1563(b)(2)(D).
(C)

Election

An election under this paragraph shall be made by the common parent of the affiliated group and at such time and in such manner as the Secretary shall by regulations prescribe. Any such election shall be binding on all members of such group and may be revoked only with the consent of the Secretary.

(c)

Increased percentage for dividends from 20-percent owned corporations

(1)

In general

In the case of any dividend received from a 20-percent owned corporation, subsection (a)(1) shall be applied by substituting “65 percent” for “50 percent”.

(2)

20-percent owned corporation

For purposes of this section, the term “20-percent owned corporation” means any corporation if 20 percent or more of the stock of such corporation (by vote and value) is owned by the taxpayer. For purposes of the preceding sentence, stock described in section 1504(a)(4) shall not be taken into account.

(d)

Special rules for certain distributions

For purposes of subsection (a)—
(1)
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.
(2)
A dividend received from a regulated investment company shall be subject to the limitations prescribed in section 854.
(3)
Any dividend received from a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following) shall not be treated as a dividend.
(e)

Certain dividends from foreign corporations

For purposes of subsection (a) and for purposes of section 245, any dividend from a foreign corporation from earnings and profits accumulated by a domestic corporation during a period with respect to which such domestic corporation was subject to taxation under this chapter (or corresponding provisions of prior law) shall be treated as a dividend from a domestic corporation which is subject to taxation under this chapter.

Aug. 16, 1954, ch. 73668A Stat. 73Pub. L. 85–866, title I, § 57(b)72 Stat. 1645Pub. L. 86–77974 Stat. 998Pub. L. 88–272, title II, § 214(a)78 Stat. 52Pub. L. 90–364, title I, § 103(e)(2)82 Stat. 264Pub. L. 91–172, title V, § 504(c)(1)83 Stat. 633Pub. L. 94–12, title III, § 304(b)89 Stat. 45Pub. L. 94–455, title X90 Stat. 1622Pub. L. 97–34, title II, § 232(b)(2)95 Stat. 250Pub. L. 98–369, div. A, title II, § 211(b)(3)98 Stat. 754Pub. L. 99–514, title IV, § 411(b)(2)(C)(iv)100 Stat. 2227Pub. L. 100–203, title X, § 10221(a)(1)101 Stat. 1330–408Pub. L. 100–647, title I, § 1010(f)(4)102 Stat. 3454Pub. L. 101–508, title XI, § 11814(a)104 Stat. 1388–556Pub. L. 104–188, title I, § 1702(h)(4)110 Stat. 1873Pub. L. 113–295, div. A, title II, § 221(a)(41)(C)128 Stat. 4044Pub. L. 115–97, title I, § 13002(a)131 Stat. 2100Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(v)132 Stat. 1207(, ; , , ; , §§ 3(a), 10(g), , , 1009; , , ; , , ; , , ; , , ; , §§ 1031(b)(2), 1051(f)(1), (2), title XIX, §§ 1901(a)(34), (b)(1)(J)(ii), (21)(A)(i), 1906(b)(3)(C)(ii), (13)(A), , , 1646, 1769, 1791, 1797, 1833, 1834; , , ; , , ; , title VI, § 611(a)(1), , , 2249; , (b), , ; , , ; , , ; , (8), , , 1874; , (D), , ; , , ; , (xvii)(II), , , 1208.)

Editorial Notes

References in Text

Pub. L. 85–69972 Stat. 689section 661 of Title 15The Small Business Investment Act of 1958, referred to in subsec. (a)(2), is , , , which is classified principally to chapter 14B (§ 661 et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see Short Title note set out under and Tables.

Amendments

Pub. L. 115–141, § 401(d)(1)(D)(v)2018—Subsec. (b)(1)(B). , amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “if—

“(i) such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after , for which an election under section 1562 was not in effect, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group, or

“(ii) such dividend is paid by a corporation with respect to which an election under section 936 is in effect for the taxable year in which such dividend is paid.”

Pub. L. 115–141, § 401(d)(1)(D)(xvii)(II)Subsec. (b)(2)(A). , struck out “, 1504(b)(4),” after “1504(b)(2)”.

Pub. L. 115–97, § 13002(a)(1)2017—Subsec. (a)(1). , substituted “50 percent” for “70 percent”.

Pub. L. 115–97, § 13002(a)(3)Subsec. (c). , which directed amendment of subsec. (c) heading by substituting “Increased percentage” for “Retention of 80-percent dividend received deduction”, was executed by making the substitution for “Retention of 80-percent dividends received deduction”, to reflect the probable intent of Congress.

Pub. L. 115–97, § 13002(a)(2)Subsec. (c)(1). , substituted “65 percent” for “80 percent” and “50 percent” for “70 percent”.

Pub. L. 113–295, § 221(a)(41)(C)2014—Subsec. (c)(1). , amended par. (1) generally. Prior to amendment, par. (1) read as follows: “In the case of any dividend received from a 20-percent owned corporation—

“(A) subsection (a)(1) of this section, and

“(B) subsections (a)(3) and (b)(2) of section 244,

shall be applied by substituting ‘80 percent’ for ‘70 percent’.”

Pub. L. 113–295, § 221(a)(41)(D)Subsec. (d)(4). , struck out par. (4) which read as follows: “Any dividend received which is described in section 244 (relating to dividends received on preferred stock of a public utility) shall not be treated as a dividend.”

Pub. L. 104–188, § 1702(h)(8)1996—Subsec. (b)(2). , reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of this subsection, the term ‘affiliated group’ has the meaning given such term by section 1504(a), except that for such purposes sections 1504(b)(2), 1504(b)(4), and 1504(c) shall not apply.”

Pub. L. 104–188, § 1702(h)(4)Subsec. (b)(3)(A). , inserted “of” after “In the case”.

Pub. L. 101–5081990—Subsec. (b). amended subsec. (b) generally, substituting present provisions for provisions defining “qualifying dividends”, providing for an election by or for an affiliated group, the effect of an election, and the termination of an election, defining an “affiliated group”, and providing special rules for insurance companies.

Pub. L. 100–6471988—Subsec. (b)(6). substituted “section 801” for “section 801 or 821”.

Pub. L. 100–203, § 10221(a)(1)1987—Subsec. (a)(1). , substituted “70 percent” for “80 percent”.

Pub. L. 100–203, § 10221(b)Subsecs. (c) to (e). , added subsec. (c) and redesignated former subsecs. (c) and (d) as (d) and (e), respectively.

Pub. L. 99–514, § 611(a)(1)1986—Subsec. (a)(1). , substituted “80 percent” for “85 percent”.

Pub. L. 99–514, § 411(b)(2)(C)(iv)Subsec. (b)(3)(C). , inserted “and” at end of cl. (i), redesignated cl. (iii) as (ii), and struck out former cl. (ii) which read as follows: “$400,000 limitation for certain exploration expenditures under section 617(h)(1), and”.

Pub. L. 98–369, § 211(b)(3)(A)1984—Subsec. (b)(3)(C). , inserted “and” at end of cl. (ii), struck out cl. (iii) which provided for a $25,000 limitation on small business deduction of life insurance companies under sections 804(a)(3) and 809(d)(10), and redesignated cl. (iv) as (iii).

Pub. L. 98–369, § 211(b)(3)(B)Subsec. (b)(6). , substituted “section 801” for “section 802”.

Pub. L. 97–341981—Subsec. (b)(3)(C)(i). struck out “$150,000” before “minimum accumulated earnings credit”.

Pub. L. 94–455, § 1901(a)(34)(A)15 U.S.C. 6611976—Subsec. (a)(2). , inserted “( and following)” after “Small Business Investment Act of 1958”.

Pub. L. 94–455, § 1051(f)(1)Subsec. (b)(1). , inserted “either” at end of subpar. (A), substituted a comma for a period and inserted “or” at end of subpar. (B), and added subpar. (C).

Pub. L. 94–455, title XIX, § 1906(b)(13)(A)Subsec. (b)(2), (3), (4). , struck out “or his delegate” after “Secretary”.

Pub. L. 94–455, § 1901(a)(34)(B)Subsec. (b)(2)(A). , struck out “(except that in the case of a taxable year of a member beginning in 1963 and ending in 1964, if the election is effective for the taxable year of the common parent corporation which includes the last day of such taxable year of such member, such election shall be effective for such taxable year of such member, if such member consents to such election with respect to such taxable year)” after “with respect to which the election is made”.

Pub. L. 94–455, § 1031(b)(2)Subsec. (b)(3)(B). , substituted “election under section 901(a) (relating to allowance of foreign tax credit)” for “elections under section 901(a) (relating to allowance of foreign tax credit) and section 904(b)(1) (relating to election of overall limitation)”.

Pub. L. 94–455Subsec. (b)(3)(C). , §§ 1901(b)(1)(J)(ii), (21)(A)(i), 1906(b)(3)(C)(ii), struck out cl. (ii) which set a $100,000 limitation for exploration expenditures under section 615 (a) and (b), redesignated former cls. (iii), (iv), and (v) as cls. (ii), (iii), and (iv), respectively, and substituted “certain exploration expenditures under section 617(h)(1)” for “exploration expenditures under sections 615(c)(1) and 617(h)(1)” in cl. (ii) as so redesignated, “804(a)(3)” for “804(a)(4)” in cl. (iii) as so redesignated, and “section 6154(c)(2) and section 6655(e)(2)” for “sections 6154(c)(2) and (3) and sections 6655(e)(2) and (3)” in cl. (iv) as so redesignated.

Pub. L. 94–455, § 1051(f)(2)Subsec. (b)(5). , inserted “, 1504(b)(4),” after “sections 1504(b)(2)”.

Pub. L. 94–121975—Subsec. (b)(3)(C)(i). substituted “$150,000” for “$100,000”.

Pub. L. 91–1721969—Subsec. (b)(3)(C)(iii). substituted “sections 615(c)(1) and 617(h)(1)” for “section 615(c)(1)”.

Pub. L. 90–3641968—Subsec. (b)(3)(C)(v). substituted “surtax exemption, and one amount under section 6154(c)(2) and (3) and sections 6655(e)(2) and (3), for purposes of estimated tax payment requirements under section 6154” for “$100,000 exemption for purposes of estimated tax filing requirements under section 6016”.

Pub. L. 88–272section 244(1) of this title1964—Subsec. (a). substituted provisions permitting a deduction for 85 percent of dividends received except that it shall be 100 percent when received by a small business investment company operating under the Small Business Investment Act of 1958, and 100 percent in case of qualifying dividends, for provisions permitting an 85 percent deduction for corporations other than one operating under the Small Business Investment Act of 1958, and for other than dividends described in .

Pub. L. 88–272section 244(1) of this titleSubsec. (b). added subsec. (b) and omitted a prior subsec. (b) which allowed a 100 percent deduction of dividends received by a small business investment company operating under the Small Business Investment Act of 1958, other than dividends described in .

Pub. L. 88–272Subsec. (c). substituted “subsection (a)” for “subsections (a) and (b)” and added par. (4).

Pub. L. 88–272Subsec. (d). substituted “subsection (a)” for “subsections (a) and (b)”.

Pub. L. 86–779, § 10(g)1960—Subsec. (c)(3). , added par. (3).

Pub. L. 86–779, § 3(a)Subsec. (d). , added subsec. (d).

Pub. L. 85–866, § 57(b)(1)1958—Subsec. (a). , inserted “(other than a small business investment company operating under the Small Business Investment Act of 1958)”.

Pub. L. 85–866, § 57(b)(2)Subsecs. (b), (c). , (3), added subsec. (b), redesignated former subsec. (b) as (c), and substituted “subsections (a) and (b)” for “subsection (a)”.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, § 13002(f)131 Stat. 2101

“The amendments made by this section [amending this section and sections 245, 246, 246A, and 861 of this title] shall apply to taxable years beginning after .”
, , , provided that:

Effective Date of 2014 Amendment

Pub. L. 113–295section 247 of this titlePub. L. 113–295section 221(a)(41)(K) of Pub. L. 113–295section 172 of this titleAmendment by not applicable to preferred stock issued before (determined in the same manner as under as in effect before its repeal by ), see , set out as a note under .

section 221(a) of Pub. L. 113–295Pub. L. 113–295section 221(b) of Pub. L. 113–295section 1 of this titleExcept as otherwise provided in , amendment by effective , subject to a savings provision, see , set out as a note under .

Effective Date of 1996 Amendment

Pub. L. 104–188Pub. L. 101–508, title XIsection 1702(i) of Pub. L. 104–188section 38 of this titleAmendment by effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, , to which such amendment relates, see , set out as a note under .

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, § 11814(c)104 Stat. 1388–557

“(1)

In general .—

section 1504 of this titleThe amendments made by this section [amending this section and ] shall apply to taxable years beginning after .
“(2)

Treatment of old elections .—

For purposes of section 243(b)(3) of the Internal Revenue Code of 1986 (as amended by subsection (a)), any reference to an election under such section shall be treated as including a reference to an election under section 243(b) of such Code (as in effect on the day before the date of the enactment of this Act []).”
, , , provided that:

Effective Date of 1988 Amendment

Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, § 10221(e)101 Stat. 1330–409Pub. L. 100–647, title II, § 2004(i)(1)102 Stat. 3603

“(1)

In general .—

Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 244 to 246A, 805, 854, and 861 of this title] shall apply to dividends received or accrued after , in taxable years ending after such date.
“(2)

Amendments relating to limitations .—

The amendments made by subsection (c) [amending sections 246 and 805 of this title] shall apply to taxable years beginning after .”
, , , as amended by , , , provided that:

Effective Date of 1986 Amendment

section 411(b)(2)(C)(iv) of Pub. L. 99–514section 411(c) of Pub. L. 99–514section 263 of this titleAmendment by applicable, except as otherwise provided, to costs paid or incurred after , in taxable years ending after such date, see set out as a note under .

section 611(a)(1) of Pub. L. 99–514section 611(b) of Pub. L. 99–514section 246 of this titleAmendment by applicable to dividends received or accrued after , in taxable years ending after such date, see , set out as a note under .

Effective Date of 1984 Amendment

Pub. L. 98–369section 215 of Pub. L. 98–369section 801 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective Date note under .

Effective Date of 1981 Amendment

Pub. L. 97–34section 232(c) of Pub. L. 97–34section 535 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 1976 Amendment

section 1031(b)(2) of Pub. L. 94–455section 1031(c) of Pub. L. 94–455section 904 of this titleFor effective date of amendment by , see , set out as a note set out under .

Pub. L. 94–455section 1051(i) of Pub. L. 94–455section 27 of this titleFor effective date of amendment by section 1051(f)(1), (2) of , see , set out as a note under .

Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by section 1901(a)(34), (b)(1), (21) of effective for taxable years beginning after , see , set out as a note under .

section 1906(b)(3)(C)(ii) of Pub. L. 94–455section 1906(d) of Pub. L. 94–455section 6013 of this titleFor effective date of amendment by , see , set out as a note under .

Effective Date of 1975 Amendment

Pub. L. 94–12section 305(c) of Pub. L. 94–12section 535 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 1969 Amendment

Pub. L. 91–172, title V, § 504(d)83 Stat. 633Pub. L. 99–514, § 2100 Stat. 2095

“(1)

In general .—

The amendments made by this section [amending this section and sections 381, 615, 617, 703, and 1016 of this title] shall apply with respect to exploration expenditures paid or incurred after .
“(2)

Presumption of election under section 617 .—

For purposes of section 617 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], an election under section 615(e) of such Code, which is effective with respect to exploration expenditures paid or incurred before , shall be treated as an election under section 617(a) of such Code with respect to exploration expenditures paid or incurred after . The preceding sentence shall not apply to any taxpayer who notifies the Secretary of the Treasury or his delegate (at such time and in such manner as the Secretary or his delegate prescribes by regulations) that he does not desire his election under section 615(e) to be so treated.”
, , , as amended by , , , provided that:

Effective Date of 1968 Amendment

Pub. L. 90–364, title I, § 103(f)82 Stat. 264

“Except as provided by section 104 [formerly set out as notes under sections 51 and 6154 of this title], the amendments made by this section [enacting section 6425, amending this section and sections 6020, 6154, 6651, 6655, 7203, and 7701, and repealing sections 6016 and 6074 of this title] shall apply with respect to taxable years beginning after .”
, , , provided that:

Effective Date of 1964 Amendment

Pub. L. 88–272, title II, § 214(c)78 Stat. 55

“The amendments made by subsections (a) [amending this section] and (b) [amending sections 244, 246, 804, and 809 of this title] shall apply with respect to dividends received in taxable years ending after .”
, , , provided that:

Effective Date of 1960 Amendment

Pub. L. 86–779, § 3(c)74 Stat. 998

section 861 of this title“The amendments made by subsections (a) and (b) [amending this section and ] shall apply to dividends received after , in taxable years ending after such date.”
, , , provided that:

section 10(g) of Pub. L. 86–779section 10(k) of Pub. L. 86–779section 856 of this titleAmendment by applicable with respect to taxable years of real estate investment trusts beginning after , see , set out as an Effective Date note under .

Effective Date of 1958 Amendment

Pub. L. 85–866, § 57(d)72 Stat. 1646

“The amendments made by this section [enacting sections 1242 and 1243 and amending this section and sections 165 and 246 of this title] shall apply with respect to taxable years beginning after the date of the enactment of this Act [].”
, , , provided that:

Savings Provision

Pub. L. 115–141section 401(e) of Pub. L. 115–141section 23 of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .

Pub. L. 101–508section 11821(b) of Pub. L. 101–508section 45K of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .