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Abstract: 

Dividends received by individuals have traditionally been taxed at ordinary income rates. In contrast, corporate shareholders have long been eligible for the dividends received deduction (the “DRD”) with respect to dividends received from domestic corporations. In response to a strong push by the Bush administration to eliminate the tax on dividends received by individuals, Congress has reduced the individual tax rate on “qualified dividend income” (“QDI”) to the same rate that applies to long-term capital gains. The maximum rate is thus 15%. This change is effective for dividends received during taxable years beginning after December 31, 20023 and before December 31, 2008.

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Affiliations:  1: Covington & Burling.