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Title 26, Internal Revenue CodeRelease 119-110

§563 Rules Relating to Dividends Paid After Close of Taxable Year

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter G — Corporations Used to Avoid Income Tax on Shareholders › PART IV — DEDUCTION FOR DIVIDENDS PAID › § 563

Last updated Sep 22, 2026|Official source

Summary

Corporations can treat a dividend paid after a tax year but by the 15th day of the fourth month following the close of that year as if it was paid during that year. For the accumulated earnings tax (section 531) this happens automatically. For the personal holding company tax (section 541) the corporation must choose this on its return, and the amount so treated can’t be more than either the undistributed PHC income for the year (computed without this rule) or 20% of the dividends paid that year (computed without this rule). When using section 562(a), a distribution paid in that post-year period is treated as made on the last day of the taxable year.

Full Legal Text

Title 26, §563

Internal Revenue Code, Source: USLM XML via OLRC

(a)Accumulated earnings tax
In the determination of the dividends paid deduction for purposes of the accumulated earnings tax imposed by section 531, a dividend paid after the close of any taxable year and on or before the 15th day of the fourth month following the close of such taxable year shall be considered as paid during such taxable year.
(b)Personal holding company tax
In the determination of the dividends paid deduction for purposes of the personal holding company tax imposed by section 541, a dividend paid after the close of any taxable year and on or before the 15th day of the fourth month following the close of such taxable year shall, to the extent the taxpayer elects in its return for the taxable year, be considered as paid during such taxable year. The amount allowed as a dividend by reason of the application of this subsection with respect to any taxable year shall not exceed either—
(1)The undistributed personal holding company income of the corporation for the taxable year, computed without regard to this subsection, or
(2)20 percent of the sum of the dividends paid during the taxable year, computed without regard to this subsection.
(c)Dividends considered as paid on last day of taxable year
For the purpose of applying section 562(a), with respect to distributions under subsection (a) or (b) of this section, a distribution made after the close of a taxable year and on or before the 15th day of the fourth month following the close of the taxable year shall be considered as made on the last day of such taxable year.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2015—Pub. L. 114–41 substituted “fourth month” for “third month” wherever appearing. 2004—Subsecs. (c), (d). Pub. L. 108–357 redesignated subsec. (d) as (c), substituted “subsection (a) or (b)” for “subsection (a), (b), or (c)”, and struck out former subsec. (c) which related to foreign personal holding company tax. 1989—Subsec. (c). Pub. L. 101–239, § 7401(b)(1), added subsec. (c). Former subsec. (c) redesignated (d). Subsec. (d). Pub. L. 101–239, § 7401(b)(2), substituted “subsection (a), (b), or (c)” for “subsection (a) or (b)”. Pub. L. 101–239, § 7401(b)(1), redesignated former subsec. (c) as (d). 1969—Subsec. (b)(2). Pub. L. 91–172 substituted “20 percent” for “10 percent”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2015 AmendmentAmendment by Pub. L. 114–41 applicable to returns for taxable years beginning after Dec. 31, 2015, with special rule for certain C corporations, see section 2006(a)(3) of Pub. L. 114–41, set out as a note under section 170 of this title.

Effective Date

of 2004 AmendmentAmendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see section 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004

Amendments

note under section 1 of this title.

Effective Date

of 1989 AmendmentAmendment by Pub. L. 101–239 applicable to taxable years of foreign corporations beginning after July 10, 1989, with special rules for any foreign corporation required by the

Amendments

made by section 7401 of Pub. L. 101–239 to change its taxable year for its first taxable year beginning after July 10, 1989, see section 7401(d) of Pub. L. 101–239, set out as an

Effective Date

note under section 898 of this title.

Effective Date

of 1969 Amendment Pub. L. 91–172, title IX, § 914(b), Dec. 30, 1969, 83 Stat. 723, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1969.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 563

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110