US Code

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

26 U.S.C. § 562

Rules applicable in determining dividends eligible for dividends paid deduction

(a)

General rule

For purposes of this part, the term “dividend” shall, except as otherwise provided in this section, include only dividends described in section 316 (relating to definition of dividends for purposes of corporate distributions).

(b)

Distributions in liquidation

(1)
Except in the case of a personal holding company described in section 542—
(A)
in the case of amounts distributed in liquidation, the part of such distribution which is properly chargeable to earnings and profits accumulated after , shall be treated as a dividend for purposes of computing the dividends paid deduction, and
(B)
in the case of a complete liquidation occurring within 24 months after the adoption of a plan of liquidation, any distribution within such period pursuant to such plan shall, to the extent of the earnings and profits (computed without regard to capital losses) of the corporation for the taxable year in which such distribution is made, be treated as a dividend for purposes of computing the dividends paid deduction.
For purposes of subparagraph (A), a liquidation includes a redemption of stock to which section 302 applies. Except to the extent provided in regulations, the preceding sentence shall not apply in the case of any mere holding or investment company which is not a regulated investment company.
(2)
In the case of a complete liquidation of a personal holding company, occurring within 24 months after the adoption of a plan of liquidation, the amount of any distribution within such period pursuant to such plan shall be treated as a dividend for purposes of computing the dividends paid deduction, to the extent that such amount is distributed to corporate distributees and represents such corporate distributees’ allocable share of the undistributed personal holding company income for the taxable year of such distribution computed without regard to this paragraph and without regard to subparagraph (B) of section 316(b)(2).
(c)

Preferential dividends

(1)

In general

Except in the case of a publicly offered regulated investment company (as defined in section 67(c)(2)(B)) or a publicly offered REIT, the amount of any distribution shall not be considered as a dividend for purposes of computing the dividends paid deduction, unless such distribution is pro rata, with no preference to any share of stock as compared with other shares of the same class, and with no preference to one class of stock as compared with another class except to the extent that the former is entitled (without reference to waivers of their rights by shareholders) to such preference. In the case of a distribution by a regulated investment company (other than a publicly offered regulated investment company (as so defined)) to a shareholder who made an initial investment of at least $10,000,000 in such company, such distribution shall not be treated as not being pro rata or as being preferential solely by reason of an increase in the distribution by reason of reductions in administrative expenses of the company.

(2)

Publicly offered REIT

For purposes of this subsection, the term “publicly offered REIT” means a real estate investment trust which is required to file annual and periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

(d)

Distributions by a member of an affiliated group

In the case where a corporation which is a member of an affiliated group of corporations filing or required to file a consolidated return for a taxable year is required to file a separate personal holding company schedule for such taxable year, a distribution by such corporation to another member of the affiliated group shall be considered as a dividend for purposes of computing the dividends paid deduction if such distribution would constitute a dividend under the other provisions of this section to a recipient which is not a member of an affiliated group.

(e)

Special rules for real estate investment trusts

(1)

Determination of earnings and profits for purposes of dividends paid deduction

In the case of a real estate investment trust, in determining the amount of dividends under section 316 for purposes of computing the dividends paid deduction—
(A)
the earnings and profits of such trust for any taxable year (but not its accumulated earnings) shall be increased by the amount of gain (if any) on the sale or exchange of real property which is taken into account in determining the taxable income of such trust for such taxable year (and not otherwise taken into account in determining such earnings and profits), and
(B)
section 857(d)(1) shall be applied without regard to subparagraph (B) thereof.
(2)

Authority to provide alternative remedies for certain failures

In the case of a failure of a distribution by a real estate investment trust to comply with the requirements of subsection (c), the Secretary may provide an appropriate remedy to cure such failure in lieu of not considering the distribution to be a dividend for purposes of computing the dividends paid deduction if—
(A)
the Secretary determines that such failure is inadvertent or is due to reasonable cause and not due to willful neglect, or
(B)
such failure is of a type of failure which the Secretary has identified for purposes of this paragraph as being described in subparagraph (A).

Aug. 16, 1954, ch. 73668A Stat. 198Pub. L. 88–272, title II, § 225(f)(3)78 Stat. 88Pub. L. 97–248, title II, § 222(e)(7)96 Stat. 480Pub. L. 97–448, title I, § 102(c)(2)96 Stat. 2370Pub. L. 99–514, title VI, § 657(a)100 Stat. 2299Pub. L. 108–357, title IV, § 413(c)(9)118 Stat. 1507Pub. L. 111–325, title III, § 307(a)124 Stat. 3550Pub. L. 114–113, div. Q, title III129 Stat. 3093(, ; , , ; , , ; , , ; , title XVIII, § 1804(d)(1), , , 2800; , , ; , (b), , ; , §§ 314(a), (b), 315(a), 320(b), , , 3097.)

Editorial Notes

References in Text

act June 6, 1934, ch. 40448 Stat. 881section 78a of Title 15The Securities Exchange Act of 1934, referred to in subsec. (c)(2), is , , which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see and Tables.

Amendments

Pub. L. 114–113, § 314(a)2015—Subsec. (c). , (b), designated existing provisions as par. (1), inserted heading and “or a publicly offered REIT” after “a publicly offered regulated investment company (as defined in section 67(c)(2)(B))” in text, and added par. (2).

Pub. L. 114–113, § 315(a)Subsec. (e). , designated existing provisions as par. (1), inserted heading, and added par. (2).

Pub. L. 114–113, § 320(b)Subsec. (e)(1). , substituted “deduction—” for “deduction, the earnings and profits of such trust for any taxable year beginning after , shall be increased by the total amount of gain (if any) on the sale or exchange of real property by such trust during such taxable year.” and added subpars. (A) and (B).

Pub. L. 111–3252010—Subsec. (c). substituted “Except in the case of a publicly offered regulated investment company (as defined in section 67(c)(2)(B)), the amount” for “The amount” in first sentence and inserted “(other than a publicly offered regulated investment company (as so defined))” after “regulated investment company” in second sentence.

Pub. L. 108–3572004—Subsec. (b)(1). struck out “or a foreign personal holding company described in section 552” after “section 542” in introductory provisions.

Pub. L. 99–514, § 1804(d)(1)1986—Subsec. (b)(1). , inserted at end “Except to the extent provided in regulations, the preceding sentence shall not apply in the case of any mere holding or investment company which is not a regulated investment company.”

Pub. L. 99–514, § 657(a)Subsec. (c). , inserted at end “In the case of a distribution by a regulated investment company to a shareholder who made an initial investment of at least $10,000,000 in such company, such distribution shall not be treated as not being pro rata or as being preferential solely by reason of an increase in the distribution by reason of reductions in administrative expenses of the company.”

Pub. L. 97–4481983—Subsec. (e). added subsec. (e).

Pub. L. 97–2481982—Subsec. (b)(1). inserted sentence at end providing that, for purposes of subpar. (A), a liquidation includes a redemption of stock to which section 302 applies.

Pub. L. 88–2721964—Subsec. (b). designated existing provisions as subpars. (A) and (B) of par. (1), excepted personal holding companies in section 542, and foreign personal holding companies in section 552 therefrom, and added par. (2).

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, § 314(c)129 Stat. 3093

“The amendments made by this section [amending this section] shall apply to distributions in taxable years beginning after .”
, , , provided that:

Pub. L. 114–113, div. Q, title III, § 315(b)129 Stat. 3093

“The amendments made by this section [amending this section] shall apply to distributions in taxable years beginning after .”
, , , provided that:

Pub. L. 114–113, div. Q, title III, § 320(c)129 Stat. 3097

section 857 of this title“The amendments made by this section [amending this section and ] shall apply to taxable years beginning after .”
, , , provided that:

Effective Date of 2010 Amendment

Pub. L. 111–325, title III, § 307(c)124 Stat. 3550

“The amendments made by this section [amending this section] shall apply to distributions in taxable years beginning after the date of the enactment of this Act [].”
, , , provided that:

Effective Date of 2004 Amendment

Pub. L. 108–357section 413(d)(1) of Pub. L. 108–357section 1 of this titleAmendment by applicable to taxable years of foreign corporations beginning after , and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see , set out as an Effective and Termination Dates of 2004 Amendments note under .

Effective Date of 1986 Amendment

Pub. L. 99–514, title VI, § 657(b)100 Stat. 2299

“The amendment made by subsection (a) [amending this section] shall apply to distributions after the date of the enactment of this Act [].”
, , , provided that:

Pub. L. 99–514, title XVIII, § 1804(d)(2)100 Stat. 2800

“The amendment made by paragraph (1) [amending this section] shall apply to distributions after .”
, , , provided that:

Effective Date of 1983 Amendment

Pub. L. 97–448Pub. L. 97–34section 109 of Pub. L. 97–448section 1 of this titleAmendment by effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, , to which such amendment relates, see , set out as a note under .

Effective Date of 1982 Amendment

Pub. L. 97–248section 222(f) of Pub. L. 97–248section 302 of this titleAmendment by applicable to distributions after , with exceptions for certain partial liquidations, see , set out as a note under .

Effective Date of 1964 Amendment

Pub. L. 88–272lPub. L. 88–272section 316 of this titleAmendment applicable to distributions made in any taxable year of the distributing corporation beginning after , see section 225() of , set out as a note under .

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .