IX. Dividend
Tax Reductions
ØA. For individual taxpayers, the Act provides that
dividends will be taxed at the
same rate as capital gains, thus 15 percent for most taxpayers, and 5 percent for those in the 10 and 15
percent rate brackets,
with the lower income brackets enjoying tax-free dividends in 2008.
ØB. The reduced rates apply for tax years 2003 through
2008. (The dividend rate
applies to dividends received beginning on January 1, 2003.
ØC. The reduced rates apply for regular and
alternative minimum tax
purposes.
ØD. Dividends from domestic corporations and qualified
foreign corporations qualify
for this favorable treatment. Qualified foreign corporations are those incorporated in a U.S. possession
and those eligible for
benefits of a comprehensive income tax treaty with the U.S. and having an adequate exchange of
information program
with the U.S. The foreign corporation's stock must also be readily tradable on U.S. securities markets, and must
not be a foreign personal
holding company, a foreign investment company, or a passive foreign investment company.
ØE. There
are special rules with respect to extraordinary dividends and dividends from RICs or REITs.