Section Tax 3.03 - Dividends received deduction - corporations(1) PURPOSE. This section clarifies the deduction from gross income allowed to corporations for dividends received. Dividends may be deductible due to the recipient's ownership of the payer corporation, as provided in sub. (3).(2) DEFINITION. "Dividends received" means gross dividends minus taxes on those dividends paid to a foreign nation and claimed as a deduction under ch. 71, Stats.(3) DIVIDENDS DEDUCTIBLE DUE TO OWNERSHIP. A corporation may deduct from gross income 100 percent of the dividends received from a payer corporation during a taxable year if both of the following occur: (a) The dividends are paid on common stock of the payer corporation.(b) The corporation receiving the dividends owns directly or indirectly during the entire taxable year in which the dividends are received at least 70 percent of the total combined voting stock of the payer corporation. Note:
1) Refer to s. 71.26(3) (j), Stats.2) Only cash dividends were deductible by the recipient in taxable years 1980 through 1986. This limitation was eliminated by 1987 Wis. Act 27.3) For taxable years 1980 through 1983 the deduction was limited to 50% of the dividends received.4) For the taxable year 1984 the deduction was limited to 75% of the dividends received.5) For taxable years 1985 and thereafter the deduction equals 100% of the dividends received.6) For taxable years beginning before January 1, 1993, the corporation receiving the dividends was required to own directly or indirectly during the entire taxable year in which the dividends were received at least 80% of the total combined voting stock of the payer corporation. The percentage of ownership requirement was changed from 80% to 70% by 1993 Wis. Act 16.(4) LIMITATION ON DEDUCTION. The deduction under sub. (3) may not exceed the dividend received and included in gross income for a taxable year.(5) DIVIDENDS INCLUDABLE IN GROSS INCOME. All dividend income shall be included in full in gross income on the franchise or income tax return of the recipient, whether or not certain dividends are deductible.(6) COMBINED GROUPS. The dividends elimination provisions of s. Tax 2.61(6) (e) only apply to the extent that the dividends received deduction under this section and s. 71.26(3) (j) or 71.45(2) (a) 8, Stats., do not apply.Wis. Admin. Code Department of Revenue Tax 3.03
1-2-56; am. Register, September, 1964, No. 105, eff. 10-1-64; am. (1), Register, March, 1966, No. 123, eff. 4-1-66; am. Register, February, 1975, No. 230, eff. 3-1-75; cr. (5), Register, July, 1978, No. 271, eff. 8-1-78; r. and recr. Register, June, 1990, No. 414, eff. 7-1-90; r. and recr. Register, December, 1995, No. 480, eff. 1-1-96; CR 10-095: cr. (6) Register November 2010 No. 659, eff. 12-1-10. This section interprets ss. 71.22(4), 71.255(4) (f), 71.26(2) and (3) (j), 71.42(2) and 71.45(2) (a) 8, Stats.