Title 26, Internal Revenue CodeRelease 119-110
§316 Dividend Defined
Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter C — Corporate Distributions and Adjustments › PART I — DISTRIBUTIONS BY CORPORATIONS › Subpart C — Definitions; Constructive Ownership of Stock › § 316
Summary
Defines what counts as a dividend for federal tax rules. A dividend is any property a corporation gives to its shareholders that comes from its earnings and profits built up after February 28, 1913, or from the earnings and profits of the taxable year as figured at the end of that year (you do not reduce that year’s earnings by distributions made during the year). Generally, every distribution is treated as coming from earnings and profits up to the amount available, using the most recently earned profits first. If another tax rule treats a distribution as a property distribution under section 301, it is treated the same way here. There are special cases. Payments to insurance policyholders under subchapter L are not covered by this definition. For personal holding companies, distributions count as dividends to the extent of undistributed personal holding company income (see sections 542 and 545), and a liquidation distribution made within 24 months of a liquidation plan can count only for non-corporate recipients, if so designated and notified, and only up to their share of that income. “Deficiency dividends” for RICs or REITs count as dividends (see section 860(f)). For a RIC with a non-calendar year, current earnings are first applied to stock-class distributions made before January 1 if distributions exceed available earnings.
Full Legal Text
Title 26, §316
Internal Revenue Code, Source: USLM XML via OLRC
(a)General rule
For purposes of this subtitle, the term “dividend” means any distribution of property made by a corporation to its shareholders—
(1)out of its earnings and profits accumulated after February 28, 1913, or
(2)out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
Except as otherwise provided in this subtitle, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits. To the extent that any distribution is, under any provision of this subchapter, treated as a distribution of property to which section 301 applies, such distribution shall be treated as a distribution of property for purposes of this subsection.
(b)Special rules
(1)Certain insurance company dividends
The definition in subsection (a) shall not apply to the term “dividend” as used in subchapter L in any case where the reference is to dividends of insurance companies paid to policyholders as such.
(2)Distributions by personal holding companies
(A)In the case of a corporation which—
(i)under the law applicable to the taxable year in which the distribution is made, is a personal holding company (as defined in section 542), or
(ii)for the taxable year in respect of which the distribution is made under section 563(b) (relating to dividends paid after the close of the taxable year), or section 547 (relating to deficiency dividends), or the corresponding provisions of prior law, is a personal holding company under the law applicable to such taxable year,
the term “dividend” also means any distribution of property (whether or not a dividend as defined in subsection (a)) made by the corporation to its shareholders, to the extent of its undistributed personal holding company income (determined under section 545 without regard to distributions under this paragraph) for such year.
(B)For purposes of subparagraph (A), the term “distribution of property” includes a distribution in complete liquidation occurring within 24 months after the adoption of a plan of liquidation, but—
(i)only to the extent of the amounts distributed to distributees other than corporate shareholders, and
(ii)only to the extent that the corporation designates such amounts as a dividend distribution and duly notifies such distributees of such designation, under regulations prescribed by the Secretary, but
(iii)not in excess of the sum of such distributees’ allocable share of the undistributed personal holding company income for such year, computed without regard to this subparagraph or section 562(b).
(3)Deficiency dividend distributions by a regulated investment company or real estate investment trust
The term “dividend” also means any distribution of property (whether or not a dividend as defined in subsection (a)) which constitutes a “deficiency dividend” as defined in section 860(f).
(4)Certain distributions by regulated investment companies in excess of earnings and profits
In the case of a regulated investment company that has a taxable year other than a calendar year, if the distributions by the company with respect to any class of stock of such company for the taxable year exceed the company’s current and accumulated earnings and profits which may be used for the payment of dividends on such class of stock, the company’s current earnings and profits shall, for purposes of subsection (a), be allocated first to distributions with respect to such class of stock made during the portion of the taxable year which precedes January 1.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2010—Subsec. (b)(4). Pub. L. 111–325 added par. (4). 1978—Subsec. (b)(3). Pub. L. 95–600 inserted “regulated investment company or” after “distributions by a” in heading and substituted in text “section 860(f)” for “section 859(d)”. 1976—Subsec. (b)(2)(B)(ii). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”. Subsec. (b)(3). Pub. L. 94–455, § 1601(d), added par. (3). 1964—Subsec. (b)(2). Pub. L. 88–272 inserted definition of “distribution of property”. 1956—Subsec. (b)(1). Act Mar. 13, 1956, substituted “subchapter L” for “section 803(e), 821(a)(2), and 832(c)(11)”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2010 Amendment Pub. L. 111–325, title III, § 305(b), Dec. 22, 2010, 124 Stat. 3549, provided that: “The amendment made by this section [amending this section] shall apply to distributions made in taxable years beginning after the date of the enactment of this Act [Dec. 22, 2010].”
Effective Date
of 1978 AmendmentAmendment by Pub. L. 95–600 applicable with respect to determinations (as defined in section 860(e) of this title) after Nov. 6, 1978, see section 362(e) of Pub. L. 95–600, set out as an
Effective Date
note under section 860 of this title.
Effective Date
of 1976 AmendmentFor
Effective Date
of amendment by section 1601(d) of Pub. L. 94–455, see section 1608(a) of Pub. L. 94–455, set out as a note under section 857 of this title.
Effective Date
of 1964 Amendment Pub. L. 88–272, title II, § 225(l), Feb. 26, 1964, 78 Stat. 94, provided that: “(1) The
Amendments
made by this section [enacting section 1022, redesignating former section 1022 as 1023, amending this section and section 331, 333, 381, 541, 542, 543, 544, 545, 551, 553, 554, 562, 856, 1016, 1361, 6501, and the analysis preceding section 1011, and enacting provisions set out as a note under section 333 of this title] (other than by subsections (c)(1), (f), (g), and (j) [enacting section 1022, redesignating former section 1022 as 1023, amending this section and section 331, 333, 542, 551, 562, 1016, and the analysis preceding section 1011 of this title]) shall apply to taxable years beginning after
December 31, 1963. “(2) The amendment made by subsection (c)(1) [amending section 542 of this title] shall apply to taxable years beginning after
October 16, 1962. “(3) The
Amendments
made by subsections (f) and (g) [amending this section and section 331, 333, 551, and 562 of this title] shall apply to distributions made in any taxable year of the distributing corporation beginning after December 31, 1963. “(4) The
Amendments
made by subsection (j) [enacting section 1022, redesignating former section 1022 as 1023, and amending section 1016 and the analysis preceding section 1011 of this title] shall apply in respect of decedents dying after
December 31, 1963. “(5) Subsection (h) [set out as a note under section 333 of this title] shall apply to taxable years beginning after
December 31, 1963.”
Effective Date
of 1956 AmendmentAct Mar. 13, 1956, ch. 83, § 6, 70 Stat. 49, provided that: “The
Amendments
made by this Act [amending this section and section 501, 594, 801 to 805, 811 to 813, 816 to 818, 821, 822, 832, 841, 842, 843, 891, 1201, 1504, and 4371 of this title] shall apply only to taxable years beginning after December 31, 1954.”
Reference
Citations & Metadata
Citation
26 U.S.C. § 316
Title 26, Internal Revenue Code
Last Updated
Sep 22, 2026
Release point: 119-110