[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 24 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 24
To amend the Internal Revenue Code of 1986 to exclude from gross income
dividends received by individuals.
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IN THE SENATE OF THE UNITED STATES
January 7, 2003
Mrs. Hutchison introduced the following bill; which was read twice and
referred to the Committee on Finance
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A BILL
To amend the Internal Revenue Code of 1986 to exclude from gross income
dividends received by individuals.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. EXCLUSION OF DIVIDEND INCOME FROM TAX.
(a) In General.--Part III of subchapter B of chapter 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 INDIVIDUALS.
``(a) Exclusion From Gross Income.--Gross income does not include
dividends otherwise includible in gross income which are received
during the taxable year by an individual.
``(b) Certain Dividends Excluded.--Subsection (a) shall not apply
to any dividend from a corporation which, for the taxable year of the
corporation in which the distribution is made, or for the next
preceding taxable year of the corporation, is a corporation exempt from
tax under section 501 (relating to certain charitable, etc.,
organization) or section 521 (relating to farmers' cooperative
associations).
``(c) Special Rules.--For purposes of this section--
``(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 sections 854(a) and 857(c).
``(2) Certain nonresident aliens ineligible for
exclusion.--In the case of a nonresident alien individual,
subsection (a) shall apply only--
``(A) in determining the tax imposed for the
taxable year pursuant to section 871(b)(1) and only in
respect of dividends which are effectively connected
with the conduct of a trade or business within the
United States, or
``(B) in determining the tax imposed for the
taxable year pursuant to section 877(b).
``(3) Dividends from employee stock ownership plans.--
Subsection (a) shall not apply to any dividend described in
section 404(k).''
(b) Conforming Amendments.--
(1)(A) Subparagraph (A) of section 135(c)(4) of such Code
is amended by inserting ``116,'' before ``137''.
(B) Subsection (d) of section 135 of such Code is amended
by redesignating paragraph (4) as paragraph (5) and by
inserting after paragraph (3) the following new paragraph:
``(4) Coordination with section 116.--This section shall be
applied before section 116.''
(2) Subsection (c) of section 584 of such Code is amended
by adding at the end thereof 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.''
(3) Subsection (a) of section 643 of such Code is amended
by redesignating paragraph (7) as paragraph (8) and by
inserting after paragraph (6) the following new paragraph:
``(7) Dividends.--There shall be included the amount of any
dividends excluded from gross income pursuant to section 116.''
(4) Section 854(a) of such Code is amended by inserting
``section 116 (relating to exclusion of dividends received by
individuals) and'' after ``For purposes of''.
(5) Section 857(c) of such Code is amended to read as
follows:
``(c) Restrictions Applicable to Dividends Received From Real
Estate Investment Trusts.--
``(1) Treatment for section 116.--For purposes of section
116 (relating to exclusion of dividends received by
individuals), a capital gain dividend (as defined in subsection
(b)(3)(C)) received from a real estate investment trust which
meets the requirements of this part shall not be considered as
a dividend.
``(2) Treatment for section 243.--For purposes of section
243 (relating to deductions for dividends received by
corporations), a dividend received from a real estate
investment trust which meets the requirements of this part
shall not be considered as a dividend.''
(6) The table of sections for part III of subchapter B of
chapter 1 of such Code is amended by inserting after the item
relating to section 115 the following new item:
``Sec. 116. Exclusion of dividends
received by individuals.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
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