Dividends |
1099 Due Date |
R & E Tax Credit | Section 482 |
Section 475 |
Subpart F |
Tax Straddle |
US-Japan Tax Treaty
DIVIDENDS CAPITAL GAINS TAX RATE REDUCTIONS
Status:
Although legislation was introduced in both the House and Senate to permanently extend the lower rates, House and Senate negotiators were only able to extend the rates for two years through 2010 (the longest possible under the budget rules governing the bill). The House passed the final compromise 244-185 on May 10, 2006. Republicans cast 229 of the yes votes in the House, while Democrats cast 15 yes votes. The Senate voted 54-44 a day later (51 Republican Yeas, 3 Democrat Yeas). President Bush signed the measure into law on May 17, 2006.
Background:
The Jobs and Growth Tax Relief Reconciliation Act of 2003 cut the top tax rate on both dividend income and capital gains to 15 percent through 2008.
Position:
Making the dividends and capital gains tax rate cuts permanent would benefit individuals, families, the economy, and the capital markets. Lower taxes on capital make it more profitable to invest while higher rates of investment boost long-term growth and productivity. A lower cost of capital encourages companies to invest more in plants, equipment, and other capital stock, enhancing long-term growth and leading to more jobs and higher wages.
Policy Points:
As expected, companies responded to the lower rates by offering more and larger dividends. In 2004, for example, 113 publicly traded companies began paying dividends, compared to an average off 22 companies in prior years. Many other companies significantly raised the size of their dividend payments. In total, dividend increases since the beginning of 2004 equaled all dividend increases between 1994 and 2002 combined.
Recent Treasury Department data showed that the lower rates saved 24-million households an average of almost $950 on their 2004 taxes, including seven million seniors, whose average tax savings exceeded $1,230.
Beyond the direct benefit of lower taxes on dividends paid, the 15 percent rate also increased shareholder value (whether the stocks were held directly or through mutual funds). Total equity market value increased $4.2 trillion between May 2003 and the end of November 2004. One estimate suggests that $690 billion of that increase was the result of the tax cut; the actual number might be substantially higher.
In addition, the lower rates are an important step in promoting corporate governance, as companies responded to the " discipline of the dividend. " Because of the need for cash to pay them, dividends are a more tangible and more reliable measure of corporate profitability than accounting statements. The rate cut likewise acts as a counter-balance against less efficient uses of profits.
Updates
Other Resources
Comment Letters
- SIA Requests Guidance Of The Treasury On Issues Arising Under New Internal Revenue Code Section 965, In Regards To Temporary Dividends Deduction With Certain U.S. Corporations Receiving Cash Dividends From CFCs - pdf 5.0, 12/03/04
- SIA's Recommendations For Guidance From The Treasury And IRS To Issue Information On Reporting By Securities Firms With Respect To Substitute Dividend Payments Made To Individuals And Distributions Paid On Foreign Securities, And Request For An Extension Of The Deadline For Mailing Forms 1099 To Customers - pdf 5.0, July 10, 2003
- SIA Appreciates Efforts Of The Tax Policy Dividends Exclusion Team Regarding The Proper Treatment Of Dividends Received By Securities Firms With Respect To Securities That Are Inventory Under The President's Dividends Exclusion Proposal - pdf 5.0, March 20, 2003
- SIA Comments To Tax Policy Dividends Exclusion Team As Supplement To January 31, 2003, Concerning The Administration's Proposal To Eliminate The Double Taxation Of Corporate Earnings - pdf 5.0, March 11, 2003
- SIA Board Of Directors Letter In Support Of Ending Double Taxation Of Dividends - pdf 5.0, February 10, 2003
- SIA Comments To The Treasury's Tax Policy Dividends Exclusion Team Supporting The Elimination Of The Double Taxation Of Corporate Earnings - pdf 5.0, January 31, 2003
- SIA Requests the IRS Grant Securities Firms an Extension of the Due Date for Providing 2003 Forms 1099 to Customers - pdf 5.0, December 4, 2003
Press Releases
- SIA Praises Senate For Extending Capital Gains And Dividends Tax Rates - May 11, 2006
- House Extends 15% Tax Rates On Capital Gains And Dividends Through 2010 - May 10, 2006
- 2-Year Cap Gains And Dividends Extension Agreement Reached By Congressional Leaders - May 9, 2006
- US Economy Strong and Growing, With Help Of Tax Cuts - Jan 6, 2006
- SIA Strongly Supports President's Call To Make Tax Relief Permanent - February 3, 2005
- Tax Law Changes Have Spurred Dividend Growth - August 4, 2004
- Cut In Dividend, Capital Gains Taxes Will Spur Economic Growth As Equity Investing Becomes More Attractive To Investors - May 22, 2003
- Investors, Securities Firm Employees Flood Hill With Letters In Support Of Eliminating Dividend Tax - May 1, 2003
- SIA Lauds House Vote To Fund President's Proposal to End Double Taxation Of Dividends; Urges Senate Backing Of Tax Cut
- SIA Chairman John H. Schaefer To Testify In Support Of Dividend Tax Reform - March 4, 2003
- SIA Board Of Directors Writes In Support Of Ending Double Taxation Of Dividends - February 10, 2003
- Research Reports: President's Dividend Tax Relief Will Directly Support Savings; Firms Post $1 Billion Pre-Tax Loss In Fourth Quarter 2002 - February 6, 2003
- 12,000-Plus Tell Capitol Hill To End Investor Tax On Dividends As Securities Industry Launches Grassroots Campaign To Demonstrate Support For President's Initiative - February 5, 2003
- Bush Tax Proposal Will Benefit Investors, Businesses, Economy - January 7, 2003
Other News
Publications
Reports
- Treasury, IRS Provide Benefits Of Certain Dividends Technical Corrections For 2003 - February 19, 2004
- Treasury & IRS Issue Guidance On Information Reporting On Dividends From Foreign Corporations, Notice 2003-79 - pdf 5.0,
November 26, 2003
- The Internal Revenue Service Has Issued Notice 2003-71 Providing Further Guidance On The Application Of This Year's Dividends Tax Cut To Dividends Paid By Foreign Corporations - October 3, 2003
- IRS Notice 2003-69 Containing The List Of U.S. Income Tax Treaties Approved For Purposes Of Applying The New 15 Percent Tax Rate To Dividends Of Foreign Corporations - pdf 5.0,
September 30, 2003
- New IRS Guidance Concerning Payments In Lieu Of Dividends - pdf 5.0 - September 16, 2003
- Excerpt from Research Reports, Vol. IV, No.1 (January 31, 2003): Defending the Dividend by Frank Fernandez - pdf 5.0
Talking Points
- Talking Points In Support Of The President's Jobs And Growth Plan From The Bush Administration
- SIA Talking Points
Testimony
Related Links
