Page:United States Statutes at Large Volume 117.djvu/779

 117 STAT. 760

PUBLIC LAW 108–27—MAY 28, 2003 (4) In applying this subsection with respect to any passthru entity, the determination of when gains and losses are properly taken into account shall be made at the entity level. (5) For purposes of applying section 1(h)(11) of such Code, as added by section 302 of this Act, to this subsection, dividends which are qualified dividend income shall be treated as gain properly taken into account for the portion of the taxable year on or after May 6, 2003. (6) Terms used in this subsection which are also used in section 1(h) of such Code shall have the respective meanings that such terms have in such section. (d) EFFECTIVE DATES.— (1) IN GENERAL.—Except as otherwise provided by this subsection, the amendments made by this section shall apply to taxable years ending on or after May 6, 2003. (2) WITHHOLDING.—The amendment made by subsection (a)(2)(C) shall apply to amounts paid after the date of the enactment of this Act. (3) SMALL BUSINESS STOCK.—The amendments made by subsection (b)(3) shall apply to dispositions on or after May 6, 2003.

Applicability. 26 USC 1 note.

SEC. 302. DIVIDENDS OF INDIVIDUALS TAXED AT CAPITAL GAIN RATES. 26 USC 1.

VerDate 11-MAY-2000

13:45 Aug 26, 2004

(a) IN GENERAL.—Section 1(h) (relating to maximum capital gains rate), as amended by section 301, is amended by adding at the end the following new paragraph: ‘‘(11) DIVIDENDS TAXED AS NET CAPITAL GAIN.— ‘‘(A) IN GENERAL.—For purposes of this subsection, the term ‘net capital gain’ means net capital gain (determined without regard to this paragraph) increased by qualified dividend income. ‘‘(B) QUALIFIED DIVIDEND INCOME.—For purposes of this paragraph— ‘‘(i) IN GENERAL.—The term ‘qualified dividend income’ means dividends received during the taxable year from— ‘‘(I) domestic corporations, and ‘‘(II) qualified foreign corporations. ‘‘(ii) CERTAIN DIVIDENDS EXCLUDED.—Such term shall not include— ‘‘(I) any dividend from a corporation which for the taxable year of the corporation in which the distribution is made, or the preceding taxable year, is a corporation exempt from tax under section 501 or 521, ‘‘(II) any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.), and ‘‘(III) any dividend described in section 404(k). ‘‘(iii) COORDINATION WITH SECTION 246(c).—Such term shall not include any dividend on any share of stock— ‘‘(I) with respect to which the holding period requirements of section 246(c) are not met (determined by substituting in section 246(c)(1) ‘60 days’ for ‘45 days’ each place it appears and by substituting ‘120-day period’ for ‘90-day period’), or

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